I'd have to say that the metal pulled out in the first part of the threading pretty much tells the story. It's toast as far as fitting in a same thread size BB. You can chase out the threads but that won't replace metal that is already gone. It'll just clean up what is smeared into the way and leave you with half height or less threads with plateau tops.
It leaves you with two options as far as I can see. First is to have the BB shell re-threaded to a BB style that uses a larger thread size. But unless it is larger enough it'll just mess up the threads again. On top of that I'm sort of thinking without checking that this is already the much suggested larger Italian threading that folks suggest as a fix for ruined English size threading. If so then that won't help you at all. Second, or perhaps the only option, is to use a threadless BB that pressure locks into place thanks to tapered cones. Velo Orange sells such a beast.