Ok I emailed Kobo for help and this is what they sent:
Thank you for contacting Kobo Customer Care. To have the ebooks loaded properly again you can remove and readd ebooks from our web site.
1. Log into the www.kobobooks.com web site (from a computer) with your account and click My Library in the top right corner.
2. Checkmark next to all of the ebooks that are missing and select Delete.
3. Sync the reader so the books are `removed` from the reader.
4. Select the Trash back on the web site, checkmark all of the ebooks again and select Undelete.
5. Sync the reader again to restore the books.
Please don`t hesitate to contact us if you have any other questions or concerns. If it is regarding this issue please refer to this incident ticket number.
The Kobo Team
I messed around with it a bit and finally got it to work. I think I didn't sync it properly when I tried the first time. Also of note, the book has to be in the I'm Reading section of My Library on the website when you initially delete it. I was doing it from the Purchased section which didn't work.
Tip: to copy book into I'm Reading from Purchased, select the book in Purchased and hit Bookmark. It asks you where to bookmark (i.e., what page). Just hit yes to bookmark at page 1, then presto book is back in I'm Reading.
The downside: I had to page all the way through to get close it and get the credit for Reading Life. I'm such a dork.
Cheers for the help!