It is more than setting that you lose, you lose the data that Apple has forced to be stored in the app itself. Its the big problem with "restore and set up as new" advice the Genius bar loves to spew if the app hasn't taken the time to make a way to export/import the data outside of iTunes, you lose it.
Apple has done us no favors in this area.
OP, is there any chance the hard drive is alive and you can get your backup off of it? Not that I have had the guts to try this myself....
Hopefully there is an acceptable solution out there.
I know there is the "transfer purchases" option, but i can't determine if that transfers the app data either.