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More recent firmware versions use some hardware features that the earlier firmware versions didn't, so if the device had a hardware fault affecting a feature used only by the newer firmware, the device might still work okay with old firmware.
One example I know of is the 'Thumb" instruction set, which is available on all the current Kobo e-ink devices, but maybe not on the very early models. Up until version 2.4.0 the firmware didn't make use of thumb instructions, so if there was a CPU fault in the thumb circuitry then it might not affect the device. But some time after 2.4.0 (2.5.0 I think) the firmware began being compiled to make use of thumb instructions, so such a fault could show up then.
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