For the Wii System Update. If your Wii is hacked, following Dogeggs' guide, then you should have Preloader/Priiloader installed. Hold Reset when you turn your Wii on, go to System Menu hacks and enable "Skip Disc Update Check" then you won't be prompted to update by a disc anymore.
For the USB troubles, you need to start the game using an alternate IOS. Presuming that you are playing by USB Loader or the like, you need to install Hermes' cIOS222/223. This link here will teach you how. (Credit to Stomp_442)