I don't know what the black square button is, unless you mean the optical mouse??
The LCD should not have lines across it. You are dragging the lock icon across to open the screen, right? After that the LCD should stay on for as long as you've set it to (Settings/Power Saving/Screen Timeout).
Did your LCD work before you upgraded to Ermine?
I'm sorry you're having problems with your PE.

They're great when they work!