You should not modify any publish settings, as the development server relies on these. The MBS must be able to be published, otherwise of course you will not have the preview abilities in Worklight Console.
Try starting Eclipse with a fresh new workspace.
Create a new project and application (don't add any environments just yet). Start the server, run the app on the server, see if everything passes OK. If yes, carry on...
As for "re-installing" the MBS,
One thing you can try to do is to delete the "Worklight Development Server" project from the Project Explorer view in Eclipse and then re-start Eclipse. This process will re-generate all server entities, including the MBS.