Action Over-riding Errors

[RacersEdge]

It seems like in some situations, even when there has been a mistake on the deal somehow - that if "enough action" has taken place, play continues normally. When is this the case and when is it not?

Scenario:

Hand is dealt. UTG limps. UTG+1 raises....then some one alerts the dealer to the fact that a new player just sat down at the table on the button and received a hand - which is not allowed. So what's the correct ruling here?