Any MobiPocket dictionary (or several dictionaries) will work. You need to put it in the Books/Mobipocket directory and open it once. I don't think this works when reading PDF files though, only when reading MOBI ebooks. It should work as a dictionary if you open it directly. There are a couple of free dictionaries in the MOBI download forum, for example:
GNU Collaborative International Dictionary of English and
Webster's Dictionary 1913.
I can't help with your note taking question, because I don't do any note taking.
I use the 3rd party FBReader as my primary ebook reader. It can read a wide range of DRM-free reflowable ebook formats.