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I still have my AuraHD on 3.5.0, the updates after that seemed to only address how the stock readers worked. For the H2o there may be good reason to catch a few updates.
The firmware updates offer a greater potential, only in that they could be made to effect the device at a low level and over a broader range of functions, than what the addon software deals with. The risk is very low that an official firmware release would include anything that would harm the device. That assumes that you are installing the correct Firmware for that device. Applying the wrong Firmware on a device, can certainly result in a bricked device.
There is not that much history with the new H2o, and I don't have one, so all I can say is that I have had no real problems with KSM or KOreader on my AuraHD for quite some time now. I have been through a FW update and a few KSM updates/patches as well as over 150 KOreader updates, with no problems.
Luck;
Ken
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