Please see my EDITED information above with extra information. The outcome is exactly the same. I did 10 sec hardware reset and after initial setup I do the same steps and get the same results. So this should be able to reproduce easily. Did it three time by now.
As far as your questions if unit boots. Even after all steps I outlined above the unit boots. Not sure if all functionality do work since did not had time to test it. But at this stage opkg update always fails with message like I edited above
/usr/sbin/opkg-key: line 56: usign: not found
I still have my unit is such state. If there are any other files or information anyone needs please let me know what information you looking for and location.