A couple of changes
1) Old electrum wallets seemed to save labels in latin1, when you call json.dumps on line 83/84 it fails silently, which causes the label import to fail. Whenever electrum saves, it then overwrites your default wallet with no labels - essentially deleting all your labels. The solution to this is iterating over all the labels for old wallets decoding anything that fails to unicode() as latin1, and then unicoding it :)
2) Failing to import data and then deleting it is bad. So I'm raising an exception to avoid data being lost.
fe5be618db