Here were the cure!
I have just the same problem (formatting minidisc) and ask some of my friends inside Sony Manuf. U can try this.
Go into service mode by doing this
(slide the hold button make it HOLD)
(while pressing -vol,) press (>)(>)(<)(<)(>)(<)(>)(<)(pause)(pause)
You can see Ver Bla! Bla!
then press (>) once you can see (manual 000)
press (+vol) five time until you see (AutCom 500)
press (enter) you can see (Access 510)
press (enter) you can see (XXXXCC 511)
press (>) seven time you can see (XXXS03 518)
press (-vol) until (XXXS03 518) become (XXXS00)
insert the disc and press (pause)
You will here some mechanism noise and DONE!
The disc is formatted like new (BLANKDISC)!
After that just remove the battery
I just try this but maybe some expert can add some safety precaution/advise here?
For expert just go to STEP 518 then step down (-vol key) XXXS03 to XXXS00 and press pause! The disc will be formatted.
FYI, I'm doing this with My MZ-N710