In "RR of the Black Hills" P60 there is a photo of 537 being lifted by a derrick. It is missing cab, & domes.
You said "As I said, I have never heard before that 537 was returned to service in the Black Hills."
In the Picture below that is the quote" The 537 came back to Deadwood better than ever. It is remembered that after 537 was rebuilt she could handle eight loads of wood or ore from Nemo to Lead without doubling the hill to Woodville, soomething no other narrow gauge hog had been able to do."
So I think the 537 was rebuilt in '27 and returned to the Black Hills. Remember the CB&Q's Denver Shops were the major locomotive shops for the west end of the railroad.
Undoubtedly when the C&S got the 537 in '30 they ran it through their shops for any repairs and changes they may have wanted.