Hi Clare - In case you are interested, the approach I took violates one of the oft-repeated commandments for PP'ing, that is, the usual rule that one should do all manipulations at the highest resolution available, and then down-rez at the end.
When a photo is this blurry, I will do noise reduction immediately (ie, at full rez), but then down-rez to the final size and do all my sharpening at the lower rez. This avoids unwanted sharpening of artifacts and noise.
In addition, I never sharpen all in one step, and I almost always use several different sharpening methods so that the artifacts characteristic of one sharpening method may be partially canceled (...or, at least, not amplified) by subsequent sharpening methods. For example, for this image, I did an initial weak sharpening using "Focus Magic", and then a second weak sharpening step using onOne's "inFocus".
As you know, sharpening always tends to magnify local contrast, so to compensate for this, I always use the blendIF sliders to prevent sharpening of the very lightest and very darkest tones to avoid completely blown and completely black spots from developing along the way. This is a very important part of my workflow.
Even if you don't have any 3rd party sharpening plugins and want to stick with USM, set the radius significantly different between the sharpening steps. In fact, for quite a while, a method called "octave sharpening" was favored for critical work. In this approach, only USM was used, but it was done in several weak steps, changing the sharpening radius by a factor of two or three between steps.
HTH,
Tom M