To simplify the expression (x1/2 + x-1/2)², it is crucial to avoid incorrectly distributing the exponent over addition, a common mistake known as the "freshman's dream." Instead, the expression should be expanded using the FOIL method, which involves multiplying the terms as (x1/2 + x-1/2)(x1/2 + x-1/2). This results in the correct simplification of the expression. The discussion highlights the importance of proper mathematical operations in solving exponential functions. Understanding these fundamentals is essential for accurate problem-solving in algebra.