I had the same exact issue and I resolved it using this thread.
http://forums.windowscentral.com/windows-phone-8-1/340666-error-installing-windows-phone-recovery-tool.html
Check out the post by 'rajivenator' in that thread, that's your solution.
Unfortunately you cannot select any frames from the Living Images animation, it is just a preview of the moments before your shot (i.e when you press the shoot button). The frames after that with different exposure levels can be selected using Rich Capture mode, it gives pretty impressive...
All the media files you could move to your PC and later transfer back to the SD card. For the apps, backing up your app list to the cloud won't help because you can only restore from a backup when you hard reset your phone. You could make a note (or take screenshots, or use the purchase history...
Nice logic but I don't think that's the reason. My Saudi 1520 got denim over a month ago. Microsoft doesn't support Cortana and hence even the 'Hey Cortana' feature for this variant but it still got the update. I just changed my region-language settings and am enjoying Hey Cortana.
But since...
It is a well known bug. Which country variant of the 1520 do you have?
http://m.windowscentral.com/nokia-lumias-extras-info-update-causes-false-lumia-denim-firmware-sightings
Are you sure you have denim? Try checking if there is an update to the app in the store.
And no, you don't have to downgrade.
Just in case you don't know, Rich Capture is enabled by the magic wand like icon besides the flash settings icon in LC5.
Sounds like it might be geographical, area might not have 4G coverage (which doesn't sound like a first world problem ;)) . Have you observed this everywhere you go or just a particular area?