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I just installed the Navionics Premium chip on my HDS-5 a few weeks ago and had no problem and the software upgrade was not necessary. That said, if you are having problems, I would install the upgrades before calling Lowrance because like any techical support group, the first thing they want to do is get you off the line ASAP and they do that by asking "have you installed the latest updates". So even if that doesn't solve the issue, it gets you around that tactic.
Next, are you SURE you choose and selected the Navionics chip. I forget the menu options but think it was done by going to the map or GPS "page" then choosing "properties" or "settings" then you would see a drop down next to maps and would see the Navionics chip there. Choose it then press "ENTER" button to select it. I know when I boot my HDS-5, I have to wait for everything to load then press the EXIT button before all the maps load. If I don't do this, I get a cross-hair on the screen like it's waiting me to input "navigate to" directions.
Also, turn off the unit, pull the chip and put it back in...is it in correctly and all the way? It should click when it's in all the way. Before going to Lowrance, try bringing the chip and packaging back to the point of sale and see if they will exchange it. Bring your receipt and hopefully they will do this (but may redirect you to Lowrance). Doing this will shorten the time it takes to get your Navionics up and running.
I put in 14 hours on Winni on Saturday then a few hours on Pleasant and a few hours on Massabessic and that chip is great for targeting specific bottom structure...I love it!
I think I may be able to help you out on both fronts.
I just purchased the navionics chip this year as well. I was having trouble with getting it recognized on my gps unit. I called Navionics customer support and they had me up and running in no time. I would recommend giving them a call as opposed to calling lowrance.
As for your prop question I have the same setup. My boat is a 1986 Lund Tyee 4.9 (thats 4.9 meters which is about 16.5 feet). I put a 50 HP Honda on the boat 2 years ago and I went through a bunch of trial and error getting the prop right. The difficulty was that the 50 HP is at the bottom end of what was really sufficient to power the boat. I found that the best prop was a 4-blade 10 pitch prop. Any pitch higher than that and I had issues getting on plane with more than 1 person in the boat. Find a marina that has some loaners and you can fine tune your prop until you find the right one that works on your boat. I have recently purchased a hydrofoil for the outboard that I am going to try as well. I am hoping that it will help me get on plane faster and easier. Top speed on my boat is about 22 MPH. One thing is make sure you are not over revving your boat at WOT.
Hope I helped you out!