Different amounts of light affect the colors in a hosta. I don't think however, that this is the problem. The plant you got from the grocery store is not likely Dream Queen. It appears too dark.
As far as the problems you were having:
1) sometimes due to weather, you will get the 'second story' effect and this is normal. Nothing wrong with the hosta
2) If your hosta just wasted away, there could have been voles eating the roots. Check to see if there are many/any roots when this is happening. Another reason for wasting away is competition from surrounding plantings (espcially a problem when planting under Maple trees). Move the plant to a better location and it may recover.
