RE: TX DIP settings???
1. If you want you can upgrade those servo to HS55 from hitec and they are much durable
2.Check interference. Try at another location that's couple miles away and see if you can produce the same behavior.
3. do not use that battery anymore because once it balloned it can catch fire so go to jefflube and recycle it. I think the battery was damaged prior to charging.
4. you don't need to discharge a lipo just make sure each cell do not fall below 3.0V
5. the upgrade package i recommend for the G2 uses 13T 450 out runner so i recommend 13T
ANdy