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Double tapping the misspelled word doesn't highlight it for correction? it does on my version.
What other keyboards do you have installed? I don't recall any message about replacing an existing keyboard.
If you can reinstall Swype, I'd uninstall it and see if that's causing the issue.
Like I said, I swear I had Swype installed when I installed the LatinIME.apk and was never asked to replace the keyboard. That is the apk file you're trying to install, correct?
And just to check, if you go to Settings|Language Keyboard, there is no listing for Android keyboard already?
I get a "server error" when I try to do voice to text. Every time. I have not once been able to use it. Anyone else have this issue?