Restoring is pretty straightforward, you should be able to download the stock ROM for your phone using Navifirm+. Follow this guide, but instead of downloading the file in there, get the one that corresponds with your device (There's no harm in using any firmware from there as long as it is for the Lumia 710, but if you have a T-Mobile device and you want to go back to the stock T-Mobile software, then get a T-Mobile file). If you need help picking a file, I can send you the one I put on my phone before sending it for repair.
Also, if the statusbar says 'H' instead of '4G', then you still have 4G. 'H' stands for HSPA+ which is the technical term for 4G. As for the people tile not flipping, it flips with people's pictures for me just like it does on the stock ROM, so I can't really help there. Have you added a Facebook/Google/Microsoft account for it to sync contacts?
XAP files are, simply put, the .exe files of WP7. The advantage of RainbowMod is that it is 'full unlocked' which is similar to jailbreaking or rooting on iOS/Android. With this, you can do neat things like use file managers, change themes, change the default search from Bing to Google, etc.