Trying to SBF back to 2.3.340 so I can root phone and install a custom ROM. Installing SBF succeeds but get stuck in infinite boot sequence (stays on droid eye). What could resolve this? Would factory reset after applying the SBF be a possible solution? Any other suggestions? For the time being have SBF'ed back to Gingerbread and phone is working fine.
I have seen this before. I had this exact issue when I did an SBF back 2.3.340 to get to get my phone to stock Gingerbread. But even though it would not boot 2.3.340, the leaked update.zip worked just fine.

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