There was a bug related to freezing on dictionary lookup in the first released version of the firmware (476), but it was fixed in the first update (538), and I don't recall anyone reporting it since.
I too have the Chambers dictionary, and it works flawlessly for me. I'd not tried using it with the new firmware, but I've just looked up half a dozen words, and it's worked fine.
Are you able to open the dictionary as a book? Have you tried using it on the Windows Mobi reader? If it's not working at all, perhaps the file is corrupt?
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