What are the main differences between these versions?

The first one only has 128Mbit of RAM and you can't upgrade to 256Mbit. Furthermore the V1 has no OSD.

The second is often called the best one, because it is based on the V1 but has 256Mbit Ram installed and doesn't need a Freezemod like a V3.

The third was sold at a lower price. It has fewer electronic parts but it freezes due overheating. This problem can be solved though. See My Z64 V3 keeps freezing.

The second problem is that the V3 was at first shipped with a faulty transistor. The faulty Q3 should have 9013 printed on it and the good one 9013 H. So you need to replace this one too.