There is nothing wrong with the flash and no need for any firmware update. You cannot use the on-camera menu to set the flash. But that's just a minor thing. The flash is still fully usable and compatible with the camera. You just need to learn to use the settings on the flash itself, and how to set the camera up to work with it.

The problems here is a basic misunderstanding of how Canon flash works. First thing, turn off Auto ISO, if using it (Auto ISO just makes for more confusion).

This is true... however you need to understand how the flash works in different camera exposure modes...

In any of the auto exposure modes, the camera will still set the exposure based on the ambient light, then the flash is fired as FILL (-1.66 stops typically). You can increase or decrease the flash output by dialing in some + or - FEC (Flash Exposure Compensation), but the camera is still going to want to expose based upon the ambient light it's measuring.

Because of this, your sample shots are mostly being done at too slow a shutter speed and you're seeing subject blur and ghosting from the combination of ambient light and flash, due to the long shutter speed plus the very short instant of the brighter flash. It's like a double exposure, in a sense. Various effects can occur, depending upon which of the AE modes you use - Tv, Av or P - and depending upon how the flash is adjusted (plus or minus Flash Exposure Compensation).

Often the best use of Fill flash and the AE modes is when shooting in relatively bright situations, where shutter speeds are faster and ISOs don't need to be set terribly high.

Switch the camera to M (manual) mode, and it then will treat the flash as FULL... As the primary light source, ignoring ambient light. So long as the flash is the dominant light source, you actually still get an auto exposure. However this time it's the flash's ETTL that's responsible for it (as measured by the camera's metering system).

When using the flash in M, you can use any shutter speed up to the camera's Flash Sync shutter speed... which is probably 1/200 on an SL1. The flash itself will act as sort of a shutter, with it's very brief momentary light output. It's something like 1/720 with most portable flashes. Just be careful of too slow a shutter speed, as you'll again start to record more of the ambient light and will start to see ghosting effects much like you are now.

Often the best use of Manual mode with Full flash is when working in darker situations that would force the camera too use way too slow shutter speeds, too large apertures, too high ISOs if you use any of the AE modes and the camera is trying to set itself per the ambient light conditions.

Change the aperture and ISO in order to have more or less reach with the flash. The distance it can be expected to reach at any given settings is displayed as a range on a scale on the back of the flash. So long as the distance to the subject is within that range (eyeball it or look at the focus scale on your lens), the flash will expose correctly. You still can dial the power of the flash up or down with Flash Exposure Compensations, either for personal preference or to accommodate subject tonalities that are brighter or darker than average (much as you use Exposure Compensation in the AE modes of the camera).

You also can play around with the shutter speed, aperture and ISO to record more or less of the ambient light, in addition to the flash exposure. You might want to do this to make a background darker or lighter, while the flash illuminates the subject themselves.

Those ghost effects that occur when mixing ambient and flash light can be used to show movement. Problem is, if the flash and shutter sync normally, it looks kind of odd because the ghost image ends up in front of the movement. Your flash has "Rear Curtain Sync" mode to correct this... when that's used, the movement blurs will be more correctly behind the subject's direction of movement.

Your flash also has High Speed Sync mode, that allows flash to be used at shutter speeds faster than the native sync speed... all the way up to the camera's fastest 1/4000. This is done by shortening the duration of the flash, though, and it greatly decreases the distance the flash can reach (the shorter distance displays on the scale). So be careful about using HSS. Also, HSS and Rear Curtain Sync cannot be used at the same time.

Best to use direct flash as much as possible, perhaps use a diffuser on it if it's too harsh for your liking (if diffusing it, you'll have to allow for a bit of light lost to the diffuser when looking at the distance estimates). I generally recommend avoiding bounce flash because it introduces a whole bunch of additional variables and greatly reduces the reach of the flash.

Direct flash can also be improved a lot by putting the flash on a bracket and attaching it to the camera with an off-camera shoe cord. This positions the flash higher and off to one side, so that redeye is reduced and any strong shadows are thrown down and behind the subject, in most cases.

Besides diffusers, there are also flash accessories that extend the range of the flash by putting a Fresnel lens in front of the flash, for use with longer telephoto lenses. Better Beamer Flash Xtender is one of these. Because of the greatly increased distance, it's often even more important to put the flash off-camera on a taller bracket when doing this, especially to avoid redeye.

One trick to using flash in either Fill or Full mode is to bias your settings toward over-exposure... work toward the shorter end of the distance range (increase ISO or use a larger aperture if needed). Doing this, the flash will not need to fire as fully to achieve "correct" exposure, so it will recycle much faster. You also can really speed up recycling by using rechargeable batteries (instead of alkalines) and/or by using an auxiliary external battery pack (unfortunately, 420EX needs some slight modification to be able to attach an external pack and it has to be a 3rd party product... Only the 5xxEX series Canon flashes have a socket to connect Canon auxiliary battery pack).

But, the most basic thing is to simply remember that Canon flash set to ETTL is...

FILL in any of the AE modes and...

FULL only when the camera is set to Manual mode.

And that in both modes you actually get some form of auto exposure. Plus, in both modes you can use Flash Exposure Compensation to add or reduce flash power for various reasons.