Should I Update???

[dcx2]

I got the prompt when I went to play Super Mario Galaxy 2.  It installed without wifi (I keep my wifi turned off).  Perhaps your PriiLoader interfered with Gecko OS' detection?

I don't know, I don't use PriiLoader.  Or the Disc Channel.  Or the System Menu.  Bootmii -> HBC -> Gecko OS, that's it.

[dcx2]

If Gecko OS didn't prompt you to install the IOS, and it just started playing the game, then the IOS was already installed.

And...what would I need the SM for, if I can go straight into HBC at boot without pressing any buttons?

That's weird about your friend's Wii asking for a Bootmii backup.  I don't have that problem, even if I temporarily enable WiFi to do something like transfer over FTPii.