It appears the reset image for the device is not complete -- driver-wise. After a reset, there will be an unknown device, which is actually the Surface Cover Telemetry. If you go there in Device Manager and try to get it to find a driver, no go.
You can even download the October Driver Update that Microsoft posted last month, extract it, and it still won't work (it will say it found drivers but had an error when trying to install.
If you then use Windows Update to try to get the latest updates to your system, you'll find -- after the reboot -- that not only is the Surface Cover Telemetry driver still FUBAR, you will no longer have WiFi or Bluetooth support.
People are seeing these issues as well as other ones.
The thread at Microsoft's support site is now seven pages long, but there are various fixes, some of which work for some and some of which don't work at all. Here is what worked for us:
If you reset the device and see the Unknown Device (Surface Cover Telemetry), download the aforementioned Driver Update Pack. Extract it to your drive. At that point, dig down into the extracted files and find the Surface Cover Telemetry folder. Go into that, find the INF file for the driver, and right-click install it.
That should work (it did for us).
Then, do the same for the Touch Keyboard and Type Keyboard (to be safe).
Run Windows Update and take everything.
When it reboots, your WiFi may not be working and you can see that in Device Manager. Disable and re-enable it, and you should be good to go. Notably, this worked for us, but may not work for all (your mileage may vary).
On page six of the thread, Forum Moderator Steven_B said the following:
Greetings everyone,At the time of this writing, we have not seen an officially blessed Microsoft fix, though.
We are actively investigating this issue and will work on a resolution to ensure our customers have the best possible experience on their Surface device.
Thank you for posting,
Hopefully the company will send out a fix that won't require jumping through hoops; ideally, they should patch the reset image so that a reset will work properly, without any additional manual steps.