The link in the first reply contains a link to the blog post which is our official response to the dnsmasq CVE:
https://www.netgate.com/blog/no-plan-survives-contact-with-the-internet.html
That link contains information on how to upgrade the dnsmasq version in place on 2.3.4-p1 without needing a full firmware upgrade.
As for your console, that looks like a faulty cable or connection in some way. Without knowing anything about the hardware or how you are connecting to the console, we can't give you any solid suggestions other than to try a new cable.
If you purchased that device from Netgate, contact our support team at https://customercare.netgate.com/ and someone can lead you in the right direction for the console access issue.
For factory reset, it has never been intended to be a complete reset in the way you describe. The only way to accomplish that is with a complete reinstall from an installation disk or other installation media.