I had Pocketbook 301+ and was very happy with it until a crack appeared without the device having been dropped, abused by a cat etc. I was very much outraged until found out on the forum that these things happen all the time.
Then I picked Story HD for $99 and am keeping it mostly for the screen resolution,
since my Pocketbook has been repaired for $75 return shipping included (warranty expired), and if not for the screen resolution (important mainly for image-scanned pdf files) I would consider the Pocketbook much superior: more user-friendly, better battery life, tons of useful features.
In addition to the far from perfect user interface of the Story, you "story" increases suspicions about the Iriver in general - something must be wrong with this company.
In your situation I would shop around for a different device, and it would not hurt if you try contacting the company management. Writing a letter to a senior manager might help.
(I had once a trouble with the Dell support and wrote a letter to a senior manager that helped to solve the problem)