UPDATE: Solved!
Thanks to all for the suggestions, a special hats off to Krios who provided the missing piece of the puzzle. Following is what fixed the problem for me:
- Delete both the fonts folder (user fonts) and the fonts.sqlite file located in .kobo folder
- Eject and restart device (Power off & power on)
- Connect device - the normal system serif font should appear (as evidenced by "Connected and charging")
- Create a new fonts folder and add one font, eject and verify
- I added one font at a time and disconnected, just to confirm there were no additional anomalies