As long as the image was written for your stb (DM7020HD v2) then yes you can install a OE1.6 Image on it
I assume from your post that you have a Genuine Dreambox so make sure you only install a Genuine image on it, not a clone image.
rather than going back to that old enviroment has the plugin not been updated to OE2.0 ?, 1.6 is very old now.
or maybe it's been superceded by a new plugin ?
You could also try extracting the ipk with 7zip on your pc then ftp'ing the files over to your dreambox manually
it may then work on your OE2.0 image