I was academically dismissed (due to grades from 1L) from law school as well but it's been over a decade. Personally, I don't know of anyone who has gotten admitted but I have recently applied to law school for Fall 2009. One of the schools actually waitlisted me. Therefore, it stands to reason that they will consider you....especially since you were sick. Of course, you may have to retake the LSAT and reapply as a 1L. A lot of schools will reconsider students like ourselves but for some schools it's rare that they'll bite....maybe except for someone like yourself. Just be prepared to jump through some hoops!
As for the California correspondence law school, I know of no other law school that will accept credits from a correspondence course. However, there are a handful of ABA law schools that will actually accept credits from a state accredited law school. I seriously doubt if the correspondence course is state accredited though.
The fact that you're having to take the baby bar would suggest that your correspondence school is not state accredited since (at least in California) state accredited schools are exempt from the baby bar (assuming if you possess a BA/BS degree as a law student).