This would be interesting, pretty much along the lines of when I rooted my nook back in the day. Purty much booted and ran from the external sd.
Also, I thought about something else, one problem I ran into when rooting my note 2. Symptoms pretty much the same, no matter what, I couldn't get anything to stick. Someone mentioned trying a different usb cable and that solved my problems. I'm wondering if a new cable would have any effect?
Sounds like the internal partitions might need to be completely reformatted. This CAN be done through recovery, but is tricky... However without actually having your device in my hand I'm not sure 100 what the best course of action would be. Try searching for the commands to format (or maybe someone else will post them) or maybe PM me for them but no promises. I won't post them publicly on XDA because honestly there are too many users who do stuff like one-click root and don't actually know what they're doing and I don't want to be in some way responsible for someone following the command wrong and bricking their device for good. I don't need that on my conscience. Personal choice.