TOS 2.06 needs an adaptor, 1.04 is the last straight swap for the STFM. Honestly I would say upgrading TOS is only worth doing if you want to use 'serious' apps, hard disk adapted games, or hard disks generally on the ST. For the latter 1.04 will probably be fine and the easier option to install. TOS 2.06 is much nicer for serious work, but has issues with quite a few games (unless they happen to have been patched).
If you primarly want to play disk games (originals), I wouldn't bother upgrading, as the earlier TOS versions are generally just fine for that (possibly slightly better depending on the game as some of the earlier stuff won't work on 1.04 or 2.06 - patched versions aside) - you would be better off getting a 1mb or more upgrade.
TOS 1.0 is the only one I would swap out really, as it has quite a few bugs (the worst relating to hard disks). TOS 1.02 can be software patched to run almost as as well as 1.04 (if you don't mind loosing a few kb of memory to the patch programs). If you have 1.02 - Fatspeed or BigDOS sorts out the hard disk access speed problems, Maccel (primarily a mouse accelerator mainly) allows you to do the keyboard reset like 1.04, and Pinhead speeds up program loading.
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