The battery is probably bad, but it could just be over discharged but not damaged. You can put it on the Nicd setting at 300 ma until the voltage gets up above 9v. Then use the lipo setting. You'll need to do a discharge cycle after you charge it to make sure it's giving you at least 80% capacity.

It's very doubtful that the plane will fly well with that Nimh. Your RPM will be 20-30% lower with more weight.