I am not sure on the backlash issue. But I "think" that backlash isn't supposed to work without a license. I could be wrong on this one though.
As for the arc problem with lots of blue circles, I believe this can be fixed by changing your I J arcs from incremental to absolute, or vice versa. Just change it from what ever it is to the opposite. It can be found under the Config. drop down menu under State. You will see a box for "I J Mode", just swap it and it should fix the arc/big blue circle problem right up.
Hope that helps at least a little.