While you can’t double-tap to select text in the default terminal app, you can tap and drag to select text. If you tap the function key and then the Menu key, there is a popup menu with buttons for Copy, Paste, and Select All. If you don’t need to copy, you can just tap+hold on the terminal to reveal the popup menu containing the Paste and Select All options.
I can’t really help you here except to point out that you need to use a docking station like the one on Purism’s shop. If you are already using a docking station, I don’t know why it wouldn’t work with pretty much any external display. Maybe @dos can help you troubleshoot this.
For Firefox extensions, you need to put them in the Widget Overflow Menu (≫). You can tap to open the Overflow Menu and then tap whichever extension you want, and its popup will open within the Overflow Menu. This prevents the flickering that you described. If part of the extension popup is cutoff in the Overflow Menu, you can use two fingers to zoom in (the opposite of pinch to zoom out). Once zoomed in, you can use one finger to move around. I think that the next major Firefox-ESR version will move all extensions to a dedicated menu item for extensions, replacing the Overflow Menu. I don’t know how that will affect things on the Librem 5.
As for the flickering for other Firefox elements, like the Bookmarks Menu (☆), App Menu (≡), or Tab Menu (v), these can be fixed with CSS code. By default, the Librem 5 is using the mobile-config-firefox CSS code by the postmarketOS developers.
You might be interested in my customizations, which eliminate all of the flickering and add some unique styling options:
Check my most recent comments in that post, which include updates.