After multiple trials and restarts here is what I think worked at the end:
1. Move 4 files from emergency-bridge-recovery (NiLuJe's K5 Jailbreak) I found
here after I edited emergency.sh file with the code provided by Marek (according to that page), which appears to be the same code as in the the RUNME.sh file in step 16 by @mergen3107 to the top kindle folder, then restart kindle
I attached these 4 files with edits to emergency.sh to this post.
2. I was unable to install NiLuje's Hotfix after this as mrpi did not seem to work at this stage (as it has been suggested by @mergen3107 in step 14 and 15
here)
3. I copied the official update_kindle_all_new_paperwhite_11th_5.16.2.1.1 file to the top kindle folder and restarted the kindle. This worked and allowed me to downgrade kindle to 5.16.1.1 and keep the jailbreak (it appears that it also worked to @pierexx
here, but it took me multiple trials/restarts for me to make this work - not sure why.
4. At this stage I was able to install mrpi, followed by kual, koreader and renameotabin.
Appreciate your help @mergen3017 and @pierexx!
Last question - if I ran rename from kual (renameotabin), am I completely safe from Amazon attempt to upgrade me in the future, and thus can use WiFi or there are some other security measures I should implement?