Yes, it was the latest update that did it. For some reason they decided to remove this feature of a separate dictionary.
Options to get around this would be that you could still browse or search the dictionary, but in an awkward fashion, by looking up a word in a book and then going to the dictionary from there; or you could buy another dictionary that is not tied to the lookup feature. I found this one for $5.00 that looks pretty good. It has 150,000 words.
Wordnet 3
http://www.amazon.com/WordNet-larges...4798902&sr=1-1
There are a few others in the dictionary section. Make sure the one you pick is compatible with the Kindle for iPOD, though, as some of them are not.
FYI - I read the reviews before installing updates to see if there are any bugs/problems or removal of features, such as this.