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Actually I think you are just holding the power button too long. When you are in your #3 status (screen on standard brightness), you only need a quick tap of the power button to turn the device off (status #1 - off/standby). If you hold the button too long (about 2 seconds) the backlight turns off, but the device is still on (your status #2). This is a feature built into every PPC to save power when listening to music for example.
It takes a little getting used to but just a quick press to turn on or off is all you need. I still accidently turn off the backlight occasionally, but as you noted it will eventually time out and go to sleep.
Lucky you that your first PPC is a 4700 :multi: . Great device.
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