I gave up this shortly after my last post on this thread. It was just way too daunting to go forward on my own with it. Also, the APKTool source code was released right after I spent all of that time working around that.
The issues that I had mostly stem from the XMLPullParser library but it's been a while since I looked at it. If you want to look at what I have, I'd suggest you use the latest source and mine for reference to get it to run on a phone. In short, I took the Main class in APKTool and called it from the launcher activity I made in the Manifest file.
I'd be willing to work with you on it but there's no way I'm going to by myself. I remember the errors well..
https://www.dropbox.com/sh/qijil28kmbqfduz/y9kp_cG1KR
Did you give it a try using the excellent AIDE (com.aide.ui)?