I think it can be salvaged. A particular block, well in the future, will have to be chosen. After that block, every name will have to be recomputed to determine its correct ownership under the new, correct, rules. At that time, all names will revert to their correct owners, and from then on, the exploit will be impossible. It's just going to take the Namecoin community to come together, agree on the new rules and block number, get the work done on time, and so on.