I will look into this. The two iCade modes don't touch the BT module once in keyboard mode so it must be something right in my main code. If I understand the problem right, a flag is being altered when it shouldn't be. It should only change when buttons are held down at power up. The flag tells the iCP code which mapping to use every time it scans the buttons. It sounds like a one line fix but I just have to check the code and find that line. EDIT: Okay, seems like an easy fix I had to try. I wasn't even storing the flag to flash memory so it just got lost each power cycle. It really was just a test feature back in the day. I can't believe no one has commented on it since it was released on Dec. 7. Here's a quick build that should work, but untested by me for now. The button mapping should now persist beyond power cycles but give it a test if you don't mind.
Thoroughly tested it in both ABY and AX (analogue aka Vertex Blaster) mode. Reconnects just fine in both modes without any human interaction (incl., firing up Settings, removing the prev. pairing, re-pair it etc.) in both modes - all you need to do is long-pressing "Start" to boot into the last-used mode. In ABY mode, you can dis/reconnect the controller even during playing - even in non-native games requiring BluTrol. (Tested in RR2.)
In addition, it co-exists just fine with natively supported (read: not the first (white, large) Apple Wireless Keyboard) BT keyboards. Both can be connected to the same iDevice at the same time. In games, you can make use of this, should you want to do something strange - for example, make a direction or a key "sticky", like making the guy jump all the time in Mos Speedrun. Of course, there isn't much point in all these right now that controllers still(?) don't support two-player modes. They could consider adding a new, "two-player" mode with different keypress emualtion for the second mode and with a special key combination to switch to be the second (non-standard) controller. It doesn't seem to be very hard to implement either and, unlike with the WiiMote (the only controller supported in multiplayer mode and only in iMAME4All), it would work even without JB.
All in all, I HIGHLY recommend the upgrade to this firmware. The lack of having to remove the pairing / re-pair every single time you want to play is a BIG advantage.