Yes, PRS-500 drivers are installed by the eBook Library. And it seems you have them since Reader appears correctly among USB devices...
Do you run the updater with EBL running? If so, try closing it first.
Otherwise, the only other way of switching I can think of is my old
ebook.py script. Drop it in "\Program Files\Sony\Reader\Data\bin",
enable write mode and from command line run:
If it works, that should get you back into normal mode and you can try again.