I will do the firmware update when I get a moment of free time.

When I originally formatted the drive, I used the LR16 for the exact reason you mentioned.

Are there any other possibilities for explaining dropouts? I love the sound quality, and generally want to love the device, I just need it to be more reliable. I can consider it more reliable if I know all the possible reasons that dropouts occur, such that I can try to take preventative action.