Edit: Never mind. Just figured out what you are talking about. I didn't realize the old iPod app had lyrics. I don't see anything suggesting the new one does. Sorry. I may poke around some more later. If I find anything I'll let you know.
The settings will be specific to that app. They will either be buried in the app itself, or listed for that app under the Settings app.
It is possible that the update has broken the app. Visit it in the App Store, read comments and/or check out the developers website and support page links.
To get more specific help you'll have to tell people what app you are using, and hope someone else has it too.