Be careful with the firmware versions.
I haven't completely figured it out, but I believe that the major firmware revisions (I.e. v1.x to v2.x) possibly indicate a hardware revision. That is to say, you can't use v4.2.1e firmware on hardware that has v1.0e originally.
You can go to v1.1e safely.
Having said that, if you
use the tektools app that was provided on this forum and flash via GPIB, you can't really brick the scope. If the firmware you try doesn't work, you can just flask back to the original firmware, no harm no foul.
My point of view is to upgrade to v1.1e, then play with higher firmware revisions and revert to v1.1e if it doesn't work. All you'll lose is time (It does take a loonnnggg time to flash with the afore mentioned tool like 45 minutes or so, but it does work reliably) so not so risky.
As the firmware is larger than the available space on a floppy disk containing any flash software, you cannot upgrade firmware using the floppy drive as far as I know. You can backup and restore the NVRAM and calibration data though, details are around the forum somewhere.
Enabling options is possible with a few commands sent via GPIB independently of firmware upgrading, and if you activate an option (as long as you have any associated hardware that may be required) then that change is permanent, even across firmware upgrades.
If you enable an option for which you lack the needed hardware, the scope will still boot and work fine, the option just won't be available (or appear on the boot screen), in that case it's best to disable that option to prevent any potential nuisance errors filling your logs.
I can provide instructions on how to unlock options if you don't know how.
I have heard of the no-boot-with-console-adapter thing before, but I have yet to make a serial adapter myself (I have parts, just need to design PCB's) so I can't comment further on that.
You may find the calibration problem may be due to your unlock to TDS784, as your scope is only originally calibrated to 500MHz. This means the scope is completely uncalibrated from 500MHz up to 1GHZ. I haven't played much with unlocking scopes like this (I have a TDS784C, TDS784D and TDS7894D in my collection of these series of scopes anyway, so no need) so I'm not sure what the reaction of a scope would be when performing SPC etc.
I guess you could always just revert the resistors back to a TDS754 and see if the cal errors go away.
Unfortunately, the setup requirements to calibrate these scopes is rather daunting, so.... good luck with that..... (It's taken me years to accumulate the needed gear.. I can currently go to 500MHz, and with some testing of my setup when I get bench space and time, I can now most likely get to the full 1GHz, once I get the ISA slots in my retro PC running MS-DOS configured...)