Does the TV screen say Set 2 or the display area on the DVD recorder? The original remote for the DMR-ES35VS doesn't have a screen. (If you are using a universal remote, I'm not sure how to reset the unit.)
The Set 2 indicates that the unit was set to listen to a remote on the second wavelength available on these remotes. Your remote needs to be set to the same wavelength. Press and hold Enter and then press and hold 2 (for about 2 seconds) on the remote to set it to this option. Press Return to move back through the menu or exit the screen. (Panasonic provided this feature for those with several devices so that each remote wouldn't control a nearby device at that frequency.) To get the recorder to respond to the remote, they must be set to the same range. To check, press the Functions button. Under Other Functions > Setup > Remote Control Code, you can adjust the wavelength that the receiver is looking for. (Use the up/down arrows to select a sub-menu and the Enter key to enter the sub-menu. Use the left/right arrows to select options in the secondary menu.) If the unit doesn't respond, try a different wavelength. (Press and hold Enter and then press 1 or 3. There are only three possible options for the remote/receiver.)
For a screen capture of this, see page 19 of the manual; it is available from Panasonic here: http://service.us.panasonic.com/OPERMANPDF/DMRES35V.pdf
. An original remote is available from Remotes.com: http://remotes.com/remotes/servlet/rs?a=Search&o=c&uid=0&m=DMR-ES35VS&uuid=13262363222670
. It probably comes pre-programmed for Remote Code 1.
I hope this helps.