I have been having the same issue, where I have repeatedly installed the new software update and I can't get it to run. It tries, and crashes with no information on screen or in my event log.
I tried to contact Sony Support last night, and they suggested to try installing in safe mode, which doesn't work in Windows 7.
I'm not sure what is causing this, and nothing I've tried has worked.
Fortunately, I have been using Calibre before this happened, and I have no problem transferring books to my Reader, but I had wanted to try the new Sony Reader store.
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