Doug,
A good night's sleep can really make a difference. It clarifies, and puts things into perspective.
I'm truly sorry about the situation in which you found yourself. I read the sheer joy in your posts, and then saw it turn to shock, disbelief and then resignation. I don't like to do that to folks, but it's my job. *sigh*
Ok, so your friend made a bad error in judgement, at least from your perspective, and that of the SPF. That doesn't mean all is in the trash. He is still your friend - he just doesn't share your game morality. Spend some time with him soon and remember why you are best friends.
Your runes are illegit - that sux, but you can move on. Actually the Zod is your least problem. Your real issue may be the Vex and your HoTO. Many here would feel that all items found by your druid after that are tainted and should be deleted. But that's your call.
Your reputation at the SPF is tarnished. But based on the support you are receiving in the Beacon's Billboard, that will be back to shiny in no time.
You're a good guy in my eyes. Stick around, take the high road. You've got friends here.
AE