Have you tried the following procedure (not sure if it is that same one you tried)? I had a 7961 giving me fits earlier this month & this one got it back.
Power off the phone.
Hold down the # key.
While holding #, connect an AC adaptor to the phone.
Continue to hold # until the line buttons blink amber.
Release the # key.
Enter 3491672850*#
The lights should change color from amber to red.
Note: It is important to try this procedure with a external power supply.