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Try adjusting the sensitivity for accuracy instead of speed. Took a couple of attempts but mine is working great. Didn't get the double caps but almost every word popped up the word chooser.
I completed the update on my phone yesterday and I agree with the issues. Swype has been a pain since. It has been typing many words completely wrong and even after tapping the word to change it quickly the word I'm looking for isn't listed as a suggested alternative. I'm having to manually type many words in. Just fustrating and slowing me down. I have had my phone for months and had really become used to using swype.
So, since the update, I am sometimes having an issue with it capitalizing the second LETTER of the first word (whether I use swype or not). I thought maybe I was typing/swyping too fast, but that is not the case. I would say it does it about 40-50% of the time. Example: