Live wallpapers do work, but they removed it in the official update most likely for performance and stability reasons. There are some rooted ROMs that do have Live Wallpapers though.
I talked to a rep from HTC.. he said that Verizon opted out of the wallpapers because it destroys battery life and makes the phone run much slower. He said for most everything else they tried to optimize the sense software as much as possible to improve performance despite the dated processor.
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