The way I'm reading it is that you have the option to trade in several lower-level powers for a single higher level power (which is quite different from powers simply dropping out). So you could have numerous low-level abilities (versatility) or one high-level ability (power). I don't know whether or not it will work, but it certainly sounds like an interesting approach.
As to the 5d6 fireball, I'm almost certain that it was mentioned that you could memorize it in a higher level spell slot in order to get more "oomph". It only doesn't scale with level if you continue to use the same level spell slot. Which actually sounds pretty well balanced, IMO.