Liz,
No you do not get over there fun toy factor, they really are excellent. As I wrote elsewhere in this thread -- if you want to just a quick grab to check something out, the standard binoculars are lighter and faster to sight in. The lower magnification also gives you a wider field of view, so it's easier to follow something that's moving fast. The IS binos are better if you want to see sharp detail, such as reading signs or seeing performances. However, the heavier weight makes IS binos more difficult to hold for long periods.
Yes, if don't hit the IS button they function like a normal binoculars, but the higher magnification will result in more movement unless you use the image stabilized function. I do not think the lag would be a problem for birding. It is minimal and you get used to it.
As for improvements in technology, the 15 year old unit that I have is about the same as the one that they're selling today. I don't see rapid changes in this field. Prices have also stayed pretty stable. No pun intended.