You have at least 2 problems:
1) you didn't finish your first internship, for reasons that are not immediately clear to me...it just seems like bad judgment to quit an internship 2/3 through the year. Why?
I don't think you are being totally honest. Something not so good must have been going on there, or you just can't stick to things? Or you had personality conflicts with people there?
2) You got nonrenewed for PGY2 at your 2nd internship. It looks like you at least are going to get credit for your year, which is good. So in theory you could go on to PGY2.
On the plus side, it sounds like you had/have a clinical research degree. Are there any large universities nearby, and/or research institutes where you could apply for a job? I would start emailing your CV/resume now, on your days off. And have a couple of references ready (at least their names/contact info in case someone wants to phone them). Have you ever worked in research before in a hospital or in someone's lab? If so, you might be able to get a job for a year or two while you regroup.
You need to be looking around internet sites where open spots are posted. Not sure if the "paid" sites are better than just sites like SDN that often have spots posted.
I'm also not sure how many DO spots there are around, overall...not as many as allopathic spots, for sure, but also probably not as many applicants for each spot.
You did pretty well on your inservice exam and you have said that your letter from your PD says something about you being intelligent. So your program must perceive the problem as either your interpersonal relationships with other hospital staff and/or attendings, or that you haven't applied your medical knowledge well to clinical situations. The last one is hard to prove or disprove - all interns and PGY2's to some degree have a lot of knowledge gaps in terms of what they have seen or not seen, and how to apply their "book learning". The interpersonal thing to some degree you can change that because you can always change your behavior even if it feels unnatural. Do they want you to smile more, disagree/argue less, be more obseqious (?sp)? You need to try and find someone in your program and try to get them to be brutally honest about what they think some of the problems are.