If you extract Bootmii-KEYFIX.rar to the location of nand.bin and key.bin, then run the Bootmii-KEYFIX if should fix the error from another wii issue.
If the formater fails to load your settings.txt from nand, you should be able to say no to the nand load, then it will load it form the apps.
you can try this one if you need- 4.1u-Nand_Formatter.zip
Your settings.txt is probably jacked, that is why it fails. If you can restore the nand.bin it should fix that issue.