The checkerboard pattern occurs, I believe, when the firmware fails to initialise. This could be due to a problem with the firmware itself, or with one of the data files which it uses. Given that the original poster's problems occurred following a reflash, I think we need to check both possibilities - that the internal (visible) disk is corrupt, and that the (invisible) firmware itself has failed to flash correctly. The easiest thing to check is whether or not the internal partition is corrupt and, if it is, to fix it.
If there is an issue with one of the data files, the best thing to do I think, is to first re-flash with the complete "708fmt" reflasher, which will completely re-create the internal partition, and then to reflash with the 796 updater.