I apologize if this a dumb question but how do I know which version of StrataFrame I'm running?

Ok. So if I update the database structure by installing 1.6.5 on a spare machine but leave both of our development machines on 1.6.1 they'll still work right?

I ask because we share the StrataFrame database between two computers and when I install 1.6.5 on our spare and then update the StrataFrame database that we share it wont break our development machines.

Technically, yes.  However, I would not do this.  I recommend that all people developing on the SF project remain on the same version.  Ther are other implemcations of developing on two different versions of SF.  So I would wait until everyone is ready to move forward.