I have an Epson Stylus Photo R300 which I've had for six years now and still going strong, and the only time I used original Epson cartridges was when I first bought the printer (the ones that came with it). Since then I've used Pro-Jet compatibles which cost less than a quid each and I've always found them to be very reliable and just as good as the more expensive Epson originals.
Occasionally, I have had the "Cannot recognise ink cartridges" message but I've usually remedied this by switching off the printer for a few minutes and/or going through the "Replace Ink Cartridge" process by "fooling" the printer into believing I'm replacing the cartridges (when in fact I'm simply removing and installing the same ones). Sometimes it takes a couple of attempts before it works but I've always found it gets there in the end. I know you said you've tried everything but don't give up, in my experience, Epsons are brilliant printers (I wouldn't use anything else) but occasionally like to throw their dummy out of their pram.