You don't need to be in recovery to do those steps, you can do them from inside your ROM. You can stay booted into CM7, right?
Let's break this down, and start over. Now that I'm at a keyboard, I can type out a novel on this if need be. There is no reason why this shouldn't work, that I can tell.
Here goes.
Download this file to your SD card:
http://dl.dropbox.com/u/72059024/flash_image
Also, this one:
http://dl.dropbox.com/u/72059024/recovery.img
Let your phone boot up to CM7.
Download Terminal Emulator from the Market.
Plug it in to your PC.
Open a command prompt and go to the platform-tools folder.
Type in "adb remount"
If it doesn't say "remount succeeded", stop and report back as to what exactly it says / does.
Open Terminal Emulator on your phone. All of the following commands will be typed in there, not on your PC.
Type in 'su'. It should now show you a prompt for Superuser access, press 'Allow'. Go through the following commands below, one at a time.
Please report back immediately with ANY errors.
cat /sdcard/flash_image > /system/bin/flash_image
chmod 755 /system/bin/flash_image
mount -o remount,ro /system /system
flash_image recovery /sdcard/recovery.img
reboot recovery
There is no reason I can think of why this won't work. I don't know what is going wrong otherwise without seeing it for myself, which, like I said, is possible, but we would just need to set up a time to do so.
If all went well, you should be in Xionia recovery. From here, we will flash the stock ZV9 ROM, but I don't want to bog you down with steps if you can't even get this far.
I know you've apparently done all this before, but humor me. Try it one more type, exactly as typed.