They can fail but in this forum, of all the ergodox problems I've seen solved I'm not sure a failed teensy has ever been one of them.
So ... you held the reset button down. Doesn't that put it into programming mode? Like, maybe wipe it? Try reloading the firmware and see if that tells it to become a keyboard again.
Also, if PJRC's program could see it, then it was in programming mode, and / or had lost its keyboard firmware. Further, if the program can see the device, the teensy is probably fully functional.
...good luck...