Wow, frustrating for all.
I haven't upgraded to the new 3.1 yet, but I have been saving threads with comments on problems and fixes. You may find the below threads helpful:
Fix your Sony PRS-505 Reader Library software!
NEW? Sony Reader Program - ?????
Sony Reader 3.1 software - bad again?
Epub coming to the Sony Store on 11 December
Hopefully, something mentioned in the above threads will help.