That security options "wipe" does nothing but remove any personal information on the device (email, contacts, messages, calendar items, etc), and does nothing to "wipe" it of any Operating System errors.
To do that, you will need to do a JL_cmder wipe and reload the OS fresh to the device.
How do I wipe the BlackBerry using Jl Cmder? - BlackBerryFAQ
Also, on your battery pull on the BB, did you do so with the BB remaining powered ON, or did you turn it off, then pull the battery? Pull the battery while it is powered on.
Finally, you mentioned to installed the USB drivers to the PC, but have you tried completely installing Desktop Manager? I would load version 4.2, Service Pack 2, without the Roxio media software.