Nothing really wrong with 1.21. If it works, it works. But reading through the change notes would give you an idea of all that has changed and been fixed.
Updating to 2.05.1 would be pretty easy actually and only require minor changes to the config files and macros.
First you'd need to manually update to 2.0 (including the DWC files) and from there you can update directly to 2.05.1 by uploading the zip file from that release in the web interface.
From there you could use the same upload method to go to 3.0 and then 3.2.2 but the config file would need to be replaced. Starting with a fresh config set from the config tool would be the best way to go and then adding in any customizations you currently have.
Here's a post that has more details on updating from 1.x
https://forum.duet3d.com/topic/18962/firmware-not-updating?_=1615414302153