I don't know if this will work, but if it was me I would try uninstalling and then re-installing.
First, boot using the
linux-image-3.0.0-16-generic kernel as you have been and open up a terminal (command) window.
Then try to completely uninstall the kernel which will not boot for you using
sudo apt-get purge linux-image-3.0.0-17-generic
I frankly do not know whether removing the kernel headers makes a difference or not. But since I'm somewhat OCD I would also do
sudo apt-get purge linux-headers-3.0.0-17 linux-headers-3.0.0-17-generic
Assuming the above went well I would then try to re-install using
sudo apt-get install linux-image-3.0.0-17-generic
sudo apt-get install linux-headers-3.0.0-17 linux-headers-3.0.0-17-generic
The above is just a guess on my part, but since you say 126.96.36.199 is not working for you anyway it might be worth trying.