Sorry; I may have not been clear enough:
With a Series 1 Tivo, the device will actually work without service. It does work better with service, but it still will do something without service -- i.e., it will work like a traditional VCR. That isn't the case with the Series 2 Tivos. Series 2 units are being given away so cheaply that it is clear that they make the profit solely on the service, and so the software is such that the devices serve no practical use without service.
AFAIK, the software is (now) the same across all models, within a Series. (There was a time when certain Pioneer DVR/DVD burners were stuck on their own software codestream, v4.x, because Pioneer wouldn't agree to do its part of the work for compatibility with v5 and v6, but that is no longer the case -- v7 is available for all Series 2 models. I'm not sure if that is because Pioneer finally did the necessary work, or rather gave Tivo the info it needed to do the work for them. Regardless, I believe that Series 1 models are all stuck on v3.)