the DIOS MIOS (Lite) version is hardcoded. It's not the best thing to do as it require an update of the loader each time there's an update of DM, but the version number of DM is not always correctly updated in the file specifically designed to hld the version number. (when you install the Wad, there are two files inside: the program itself and a text file with the MIOS version. That file is sometime not updated).
At the time of r1203, only DM2.3 existed, so you should have "2.3+" meaning it's either 2.3 or newer.
If you update to r1205, you'll have DM detected up to 2.6.1 and DML 2.6
About WiiWare, There are two way to launch them:
Real NAND : Listing the channels you have on your Wii, but not a lot of spaces available. (no access to SD)
Emu NAND : I don't know if the IOS base is important for the NAND emulation, I always used base56 myself. 38 is usually a pretty good base for games/channels.
The internal Wad manager to install channels to emuNAND has a problem past 3.0, I still haven't look into it. (we removed the ability to install to realNAND, could be linked to the problem)
Please use wiiBackupManager ShowMiiWads to add channels to emuNAND (or try with your base38, but it shouldn't matter as it's only extracting files to FAT32, not using any ES_ functions).