Water Damage Between Paint and Wall
Whether or not your theory about the path of the water is correct, you will need to remove any unsound material (i.e. loose paint, wallboard paper, wallboard material, plaster itself). There is no way to "re-bond" the damaged area(s).

I would start with a scraper and start taking out damage until there is nothing left but firm material. It is very likely that you will need to do some wall patching along with repainting...