Nuvinci support was very helpful, and was going to ship me a new hand controller, which gave me the nerve to open it up and take a look at what might be wrong. Having looked inside there, I don't remember seeing any quick way to disconnect a bad controller and swap in a new one without soldering, so I was glad silicon fixed my problem.
I'm not sure what your were describing seeing for the indicator, or even which indicator, whether at the front handlebar or at the rear wheel, or if that means something is out of whack. On mine just spinning the rear wheel without pedaling makes the LED on the hub flicker red only. When I move the rear wheel using the pedals, the light alternates between red and green, with green meaning I think that it senses the chain moving or tension on the chain. The flickering between red and green is rapid too and not just twice. If you mean the front indicator by the switch is going back and forth between orange and blue then I don't think I've ever seen that.
As for resetting the Harmony, that does happen when you upgrade the firmware, if you want to try it. On the bottom of the hub there's a rubber cover over a USB connection that you use to connect to a PC that has their software installed. You can get the software with firmware here:
http://harmony.fallbrooktech.net/ You might want to write down what the settings are before you upgrade, although there aren't that many. The main ones to note are the number of teeth on the front and rear sprockets. I believe my Harmony's performance improved after applying a newer firmware than the one it came with.