Well, most usb 2 devices are backwards compatible, they will work on usb 1, but they will work at the slower speed. They may be right about the power supply, if your system is already loaded pretty heavy the upgrade could cause problems. But i disagree with them about not having to disable the usb 1. Anytime ive tried to run both, i get the critical error messages similar to what you get. Disabling the usb 1 solves the problem. The instructions that come with the Stratitec cards mention this, but, it may work ok with theirs.
You can use this little utility to check your power consumption, and see how close you are to being maxed out:
eXtreme Power Supply Calculator - What Power Supply Do I Need
You can also test their theory by disconnecting devices temporarily(cd/dvd, floppy...ect), and see if that helps. A bigger power supply certainly wont hurt anything though. Also, you might want to check your
ram usage, see how much you have free.