You sure that qualifies as an ungrounded circuit? (Just to play devil's advocate here) To me that's a grounded circuit with poor installation. As you say, the wire's fine, just the installer screwed up. What's to keep you/me/anybody from just cutting off all the grounds and treating the whole house as ungrounded? You sure you won't be assuming his liability when you keep it ungrounded? (and no, I don't have a suggested repair method)
