Hi, This is a common issue with o2 build devices and i can advise the following to rectify your problem
its a little more long winded but certainly works and i have done it for a few of my friends so i know its successful
It will mean you will loose all data on the device (this does not include stuff stored on the sdcard)
You could try RUU to 2.29.405.2 using a gold card and rooting with unrevoked 3.21. if you still have problems you can try the below which I KNOW works
Create a goldcard following our guides
Download Teppics downgrade utility (this supports slcd and has a 2.1 rom built in)
[HOWTO] Downgrade Froyo (2.2) to Stock 2.1 (ANY HBOOT | WIN/LINUX/MAC | ROOT) - xda-developers
Follow the instructions on that page to downgrade your rom
Root the 2.1 device using unrevoked 3.21
http://downloads.unrevoked.com/recovery/3.21/reflash_package.exe
download this rom (teppics) and radio
[ROM] [20/06] Pre-rooted Stock Froyo (2.29.405.5) [Optional mods] - xda-developers (2.29.405.5)
put both the rom and radio on the sdcard
boot to recovery via voldown + power and select recovery
wipe the device from recovery
flash the rom
flash the radio
reboot
job done