You can update the bootloader. I had the same issue. You need to find and download the bootloader firmware file: BOOT03.09_M3S2.fls and place it in the same folder as bbupdater. Then run this command from putty/SSH: bbupdater -l BOOT03.09_M3S2.fls. If you can't find the link to the file post send me a private message w/your email address.
I tired that and it still didn't fix the issue, Bootloader too old, upgrade to 1.8