The fact that your Blaster can't identify the JTAG chain suggests there's a problem lurking somewhere that needs to be fixed. Whether or not it's related to your "latch-up" problem remains to be seen.
I won't tell you how to do your job, but I will tell you what I would do in your situation. I would first resolve the JTAG situation and see if it has any bearing on your problem. If not, then at least you're in a position to try the USB Blaster and see if you learn anything. Either it does or doesn't help, with or without the check-box, etc. These kinds of problem often take a lot of banging around before they get resolved. It's not a linear process. I'll quote my favorite line from the movie "Twelve Monkeys";
"Science ain't an exact science".