Factory reset does not revert the system updates. I suspect that the latest update could have messed up your phone. Maybe try to flash in the latest stock image?
The pause button could be a small button in top-left or right corner. Menu animations are a little slow at the moment. Also, the control buttons disappear from the screen in the second level.
Sound effects would be nice. You could simplify the controls; when pressing left side of the screen, the head would always turn left, and same for the right side. Make the pause button visible.
Re: Why no IR blaster?
Oh the good times when you could transfer data between phones with IR... At least some of the old Nokia's had this functionality.