And my guess (would love to hear from those who really know) is that the
data packets themselves have not changed in some years, even as the
algorithms the unit uses to predict which ones represent a collision
hazard have improved. Yet another reason why a unit with older firmware
should keep on operating.

Of course one should do the firmware updates, but what upsets me is the
unit refusing to operate at all if you don't. Like I said, it should
instead give some sort of semi-annoying reminder, like an occasional sound.

Does anyone know for sure what happens between a recently updated Flarm and one which has not been updated? It is quite possible that the newer firmware unit does deal with info from the older firmware unit. What Flarm have guaranteed is that firmware will be compatible forwards and backwards at least 12 months - I think that is different from saying that you will definitely not benefit from a warning if there is a longer firmware age difference. They introduced this system to replace a far worse system where there was no forwards and backwards capability, and they asked everyone to upgrade within a one month period.