I'd say it needs a wipe! Use d_fisher's JL_Cmder in my sig to wipe the BB. Be sure Desktop Manager is not running while you are using JL_Cmder. Once you get a 507 error on the screen, it's wiped.
Download and install the latest 7290 OS.
delete the vendor.xml file in c:\program files\common files\research in motion\apploader.
Then plug in the BB, run DM, select USB from the connection menu at the top (pin may not be listed, that's ok) and then run Application Loader.
You should get a fresh install of the OS.