Basically I think PDF handling sucks on the two first Kobo's, you could try just converting them in
Calibre to E-pub, usually they don't come out very clean, but you might find them easier to read that way.
As for the firmware. On the Kobo press menu/settings/overview, it should read v1.9.? (Changes often) if it reads 1.7.4 you need to update it to 1.9. you can do this by plugging it into the computer and syncing the Kobo multiple times until it notifies you that an update is available, I believe you can do this through WiFi as well.
Hope this helped