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Its been a year so there must be definatel a newer firmware version available for your phone. Just get the Nokia Update Manager software in your computer and try updating the phone. Should solve all your problems and just make sure that you take a back up of your data because after an update you will loose all your phone memmory data. Mass Memory stays unaffected.
The blinking envelope icon appears to be a reminder that you have your old SMSs still stored on your SIM card, and N96 needs them to be transferred to the phone memory -ether internal, mass storage or memory card- to properly display and manage them. So what you need to do is go to your menu, open Messaging, hit Options, select 'Sim Messages' and then transfer your SMSs to the N96 memory. Then do the same again & delete the SIM messages that will cure the flashing icon.