I should have thought of wiping the data/cache afterwards! Wiping it from stock recovery fixed it.
I applied the update.zip from the custom recovery initially. My goal was to fix a problem my mom was having with this Optimus S. She would intermittently miss phone calls (the phone wouldn't even ring), and I didn't know if it could be a CM7 or a baseband problem.
I thought it may possibly have something to do with baseband because it showed "Unknown" under the baseband version on the phone.