Try renaming the file to "factory.bin" only. Additionally, you may want to try a different firmware version to check whether both tests return the same error. I might missremember, but the latter change worked for one of my resets.
It's not clear whether you did this or not, but the file from TP-Link has to be unzipped on a PC first. Then upload the bin file that is inside the zip.
Maybe it is worth a try to contact them and explain that you bought a used one with a different firmware installed and want to use stock. The seller told you 1.1.7 was previously installed and your tests indicate that 1.1.7 is necessary to revert to OEM. If not, they might hint on how to apply other versions.
I was able to revert several EAP235-wall devices with sysupgrade using a firmware generated with tplink-safeloader. The only weird part was that OpenWRT password was retained. I'm not sure if this works with EAP265-wall.