Greg,
I am not sure about this information, however, I will pass it along and you can check it out for validity.
We have three Geo's of the 2005 and three from 2008. We use ArcPad 7 on the 2005's and ArcPad 8 on the 2008's. Plus we use the two different ArcPad tool bars; the ArcPad, and the "ArcPad Data Manager" tools from AP8.
I was told when looking at the new Geo's that they come with AP8 but that it was not backward compatible with the 2005 series O/S and that the GPS correct version 3.10 was not compatible with the old operating system or GPS firmware.
We never actually tried updating any of our 2005 series, because of the possibility of such compatiblity issues, but I can imagine that the issues of which you speak, may be of this nature.
Let me know if you had any issues with upgrading the 2005 series and which versions you are using.