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Hi e-flythis!

• Your dongle can be used with Reflex XTR 5.00.0 up to 5.03.1.
• 5.04 uses the new slimstick dongle (red) or the iVol, it's sold out
  
• You can purchase the Update to 5.05.x (99 €) by returning your old 5.03 dongle
• selling shop or simwerk Read the update conditions (EN).
  

Hi e-flythis,

your from USA? The full version is 219.00 € in Europe and USD 219.00 in USA (MRC), I researched the US market, but didn't find any upgrade option, only the full version between $197.99 and $219.00.
$ 136.00 is a lot, but the R/C hobby is expensive, and after years... Is this upgrade worth it? Yes for me it is, all updates since 5.00.0 are free again.

your Questions:
1. and 2: Your dongle can only be used with Reflex XTR 5.00.0 up to 5.03.1 it's NOT compatible with 5.04, so you can't use it with 5.04.x
3. Yes you can buy the "Hard-/ Software" update (The hardware-update contains a new interface, a new connection cable for your transmitter as well as the latest full version of the Reflex® XTR 5.05)
4. Yes, you have to turn on your transmitter, if not, it won't work, how to fly a plane? And the software reminds you to turn off your transmitter at the end, this prevents you, running off battery power.
You can klick an "cancle" and use the reflex, demoflights etc., but you can not fly any plane / heli.

It's a new free update announced v. 5.05.5 (march / april) with a 3D feature, have a look .
Update path:
The actual version 5.05.4 offers the following new features:

• Crash&Retry-Trainer for general training of basic control skills.
• New user context menu offers observe, ignore and disqualify functionality, available via right click either on a user model or on a users entry in the user list.
• Disable option for no-fly zone.
• New helicopter model Spike from Artfantasie.
• New scenery "Salzkammergut".
• New RMK version 2.44.

Changes in 5.05.3:

• Rotating and by mouse control rotatable display of the selected model in the Model selection dialog.
• Scrolling display of the selected scenery in the Scenery selection dialog.
• Player models are now loaded in background without interrupting the own simulation.
• New model Three-Dee RIGID from HENSELEIT HELICOPTERS.
• Improved shadow rendering.
• New italian language option.
• Extensive revision of various code units for improved performance and reliability.

Changes in 5.05.2:

• 3 new models: A-6 Intruder DF-55, F-16 Fighting Falcon DF-55 and F-4 Phantom DF-55 from KYOSHO.
• The Data display can now be displayed in full screen mode.
• Support of USB-interfaces with serial numbers greater than 8000.

Changes in 5.05.1:

• When participating in a flight convention, the flight of a certain user can be observed by selecting the user in the User list.
• The Chat window is now sizeable and opens automatically when a new message has been received. Size and position are saved automatically.
• Join flight convention is enabled even when participating in a flight convention. Thus you can observe which other flight conventions are currently taking place. If desired you can switch directly to another flight convention.
• The Data display is visible even when participating in a flight convention.
• The exhaust visualization has been improved by considering turbulences at the exhaust output.

Changes in 5.05.0:

• Flight conventions: Fly together with up to 8 pilots over a local network or the internet.
• New acoustics: The REFLEX sound output has been completely revised. New high quality model and environment sounds are resulting in a much more realistic flight experience.
• Enhanced representation of the models in respect of rotor and exhaust visualization.
• A new scenery: "Wasserkuppe" in germany.
• Model specific channel assignment: This function allows you to define a special channel assignment for single models. Through this it is possible to use in-radio programmed mixing functions.
• Revised helicopter physics and helicopter model parameters.
• 5 new helicopter models: TREX 450SE and 450SE-V2 from ALIGN, Swift 16 and Hummingbird V3 from Century, Hornet X-3D and X-3D PRO from MS Composit, EP CALIBER 400 from KYOSHO.
• Online update: REFLEX now offers an automatical product update over the internet.
• New RMK version 2.43.

Changes in 5.04.1:

• Support for the new REFLEX USB controller and USB interface.
• Extended number of channels to 12.
• More easy access to calibration and channel assignment by using real easy to understand images.
• 2 new sceneries from the Alps mountains: MV Zugspitze (Germanys highest mountain) and MFC Salzburg (Austria).
• New helicopter CALIBER-5 from KYOSHO.
• Program startup with splash screen display.
• Optimized software performance to increase the framerate of the next to reality simuation.
• Start the torque- and hovertrainer directly from the running simulation.
• Brandnew RMK version 2.42 to create more exciting models for REFLEX XTR.

Your welcome.