Well, if it's reading less than .990 in 68 deg. water (and theres no air bubbles on it or anything) then is it possible you have really hard water? I dunno, maybe I'm grasping at straws here, have you checked it in some store bought distilled water or anything like that?
As far as the wine kit goes, you'll have to hope that someone with more experience than I have will offer an opinion. In general I'd say, as long as you've maintained good sanitation, you'll end up with something that is, at the very least, drinkable and most likely still pretty good.
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