As for firmwares, they've released multiple since the first introduction of J3. Some people download some flash games and etc, but J3 does not support the newest version of flash, so the application variety is limited by those usable with the previous version of flash.
I guess one's definition of "laggy" may differ person to person, but from having 2 itouches and the J3, the touch on the J3 is NOT as smooth or refined as the itouches, although, as I mentioned previously, is not much of a problem, since it doesn't really need the touch interface as good as apple products. Especially since there is no internet browsing, you only use the touch screen when you're changing music, changing the eq settings, watching videos, looking at pictures(probably the only time you use multitouch capability of J3). J3 has external buttons for pause, rewind, fast forward, volume control and lock/power button, so using the touch screen is not necessary for simple things.
Sorry I got distracted comparing the J3 and itouch. But if you don't need the option of extending the memory with microsd card, you should also consider the S9.