Classic was crashing for me too. Renaming the ClassicApps folder did the trick and now classic is working fine (starting up without crashing). Thanks for the tip.
The OTA update definitely updated Classic to 1.1.05.
I managed to get sound working by changing Emulation mode to games. After switching to games mode, the sound could be toggled on. I can hear the background music in bejeweled 2 now.
The update seems to have fixed some other issues too. I was having problems in bejeweled where a notification would lock up classic when I was in Bejeweled2. This no longer happens. You can also resize the screen. It did crash on me once so it isn't perfect.
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