Four channels definitely don't stick (they might stick, but when you click Select, it shows 2 channel as highlighted). I do see 4 sets of bands though for custom 2, where I selected 4 channels.

Aha. There's nothing wrong. You're just misunderstanding the user interface. It's a variation on this.

I fiddled around with the equalizer and changed it to 4-channels. Upped the bass, etc. All of a sudden, the music had "life" to it. It had its normal 3-dimensional quality. And I had no complaints.

This isn't because you were suddenly getting something for nothing in terms of the four-channel equalizer. All that happened is that half of the bands you were fiddling with suddendly disappeared, and of the half that remained, their frequency centers changed. Just by chance, erasing some of the bands and changing the frequency centers of the remaining bands happened to be a setting you liked better than what it had been before. But it wasn't doing any magic, it was just a suddenly different (somewhat random) set of frequency corrections.

You don't need the four-channel mode to get those corrections. Two of those four channels were never getting used to begin with (the rear channels).

I upgraded to version 2.0. Boom. Doesn't sound as bad as the original config, but definitely not as good.

Probably because the equalizer code changed significantly between 1.x and 2.x

You just need to put the thing in two channel mode and start tweaking again. If you can remember what the settings of each of the five bands were before, you can adjust the frequency and Q of five of your available ten bands to match, and then use the other five for even more tweaks if you like.