The trace damage is repairable. You are correct with your proposed repair pic. It looks like he couldn't figure out where the alt d0 was...
And he sucked with an iron.
I am not sure off the top of my head what the other two traces are, but the alt d0 trace being broken will keep it from booting the original TSOP. It is possible that the board was working with a mod chip in place. The broken traces look like they all go to the TSOP, so they wouldn't be needed if you were booting off a chip.
If it were me, I would go ahead and repair the traces (asuming that you are good with an iron). Read the trace repair guides and make sure to use flux and 30 gauge wire.
As far as the PSU, you might be able to replace the fried component, but personaly I would just swap it out for a good supply. (With that kind of damage, it is dificult to tell if there is further damage that you cant see...)
It is rewarding to repair a trashed box!
Cheers
