OK, FWIW I also have a VMS1100 but have not seen the problem you've had. At the moment checking capacity shows I have 55 hours of HD recording and 32% of my capacity used. Go figure, since I pay for 100 hours as you do.
While I haven't seen any reports on the forum of the reduced capacity there have been several about the firmware update causing a reboot and loss of all recordings. I'm assuming that has happened often enough that Verizon knows about it and has the manufacturer working on a fix.
In the mean time, I don't know what I'd do in your situation. I'm thinking I'd ask for a new VMS1100. Maybe someone else will chime in with a better idea.
Good luck.