Since you can access the FAT partition, you should see there the folder .kobo, and in this folder the database file KoboReader.sqlite. I order to activate the device add to the table user (which has currently only one row) of this database file a second row with any content in each field.
As for updating to a newer FW, see
this thread (the files go to the same .kobo folder).
You can do both activating and updating at the same time.
I am not sure whether this will make your USB connection work, but it is worth trying.