Within two days of buying my KT, I added an SD card. I don't recall which software version it was on at the time, but I know that Kobo Desktop upgraded it the first time I registered the unit.
I have only sideloaded books on my unit, split between the SD card and main memory -- I typically keep unread books (my shortlist) in main memory, and the remainder of my walkaround library on the SD card.
My card gave me absolutely no problems (that I know of) until I installed software version 1.9.12. I immediately started suffering from the kinds of problems described in other forums (sudden return to home screen, lockups, etc.)
My card is a "Patriot LX Signature Flash, 16GB microSDHC Class 10 (PSF16GMCSDHC10)" purchased from Canada Computers. Patriot is a mainstream manufacturer of memory products, so the card is not an overseas knock-off.