OK. I found OFW 3.50 and tried to install it via recovery, but no go.
It asks to install 3.56 or above. I guess this is the spoof making it think it is on 3.56, so anything lower will no be accepted (I tried it anyway but it just hung there as expected)
Next I tried re-installing the custom 3.41 with 3.56 spoof (through recovery), just to get my XMB back and stop it from turning off. That way I could start over.
But again it wouldn't accept the update. I reformatted my USB in WinXP but that didn't work either.
Any ideas what else I can try? Any of the other options in recovery menu worth a shot? (rebuild database etc)