I have tried to reset a Polycom IP331 phone to factory settings. I don't know the former Admin Password. When I do a manual reset using 1357 and the MAC code it says configuration reset. However i

Have you tried the solution found on this website? Lost admin password on Polycom nexMatrix product assistance

If your phone isn't on a constant reboot cycle and can boot up, then go into Admin Setting and do a Format File System reset. NOTE: Only try this if you know how to download the software files onto the phone via FTP server. Once you download the latest software your phone should be almost as good as new.

You need to reinstall all the files back onto the phone. You can get the files from the Polycom Website. You can also follow the instruction from my Polycom 501 Fixya blog to see how its done.

The factory Admin info is Polycom for the user and 456 for the password. If the password has been changed, you can do a factory reset by holding down 4 keys until it restarts. The four keys are * 4 6 8.

you don't need to worry you can restore the setting by using "factory restore" and contact your service provider.

Default Passwords:
To get into the web interface, the default username/password is "Polycom"/"456" (Note that this does not work with Safari 1.2.2.)
To get into the Admin interface on the hard phone, the password is "456". (Prior to v1.3.1, the web interfaces to the phone uses "Polycom"/"SpIp" as the username/password.)
The "user password" (not used much) defaults to "123".

To reset a lost admin password to default: at phone boot, during the 5 second countdown, push/hold 468* on the phone. Enter the phone's MAC address as the password. This will reset network info but keep peers loaded. Tested on Soundpoint IP 650.

Plug the phone in and allow it to boot up. Once the home screen is displayed, press and hold the 4, 6, 8, and * keys for about three seconds, or until you hear an audio alert and the phone asks you for a password. Enter 456 (default Admin password) and the phone will default itself. If the password has been changed, and 456 does not work, enter the MAC address of the phone as the password. Entering the MAC address of the phone will only reset the Admin password to the default, so it will probably be necessary to repeat this procedure, entering 456 the second time, to factory default the phone.

RTFM!!!
section 8, page 4

System -> Diagnostics -> Reset system
you will need serial number for this

good luck.

The polycom didn't allow for numbers, only letters.....
How do I do password recovery in this case?

The default is Admin with password of the 14-digit serial number