One major difference is v4.0 has THX EX. There may be other changes too. Try the SMR Lexicon Forum (I think you can access it through the Lexicon website) for more information.
On the DC-1/DC-2, software revision is independant of whether or not the unit has DTS (DTS is implemented on a separate daughter card). IOW, you can have a v4 AC-3 only unit. MC-1s only came in the "loaded" flavor.
As far as THX-EX, most of us Lexicon owners prefer Logic-7.
I briefly had both of these units, and if it was me, and I had to have Logic 7, I'd opt for the MC-1. IMHO, I thought the MC-1 sounded slightly better and according to some reports I've read, may be more dependable too. I know that Mr B said that they use the same internals, all I know is what I heard, and what I've read?