Unfortunately that's probably one of the risks involved when playing around with the new dashboard and everything. I'm guessing Microsoft were not anticipating an issue that would mess with the avatars in A Kingdom for Keflings.
In which case there's probably nothing you can do. Because you can't go backwards in your game, you probably won't be able to get that achievement to activate now. I guess your only option is to play your Xbox in the current dashboard and start a new game.