The Brake Squeal sound has to be set with a button. There may be times that you do not want the brakes to squeal. Continued squealing every time the train comes to a stop could become annoying after hearing it over and over. I would rather have that under my control.
As with any technology, new products tend to make older versions obsolete, but in the case of LM modules, the only limits on the older LM's is the memory space, which increases with each new iteration. As sound files improve they will probably get larger, taking up more memory. Under a worst case scenario, LM1's can easily be replaced by newer LM versions, but they will always work within the system if upgrading is not an option for you.