The two T1s here have the firmware that goes with the modified reader app. They both are working OK. I don't see a need to update. But if Morkl was to bring out the new reader app, I would upgrade. But for now since things work, no need to update.
As for bringing up the dictionary, I think its how you swipe. I can do so on my 650. Not often though. So try to figure out what it is you are doing/how you are swiping.