The Wode is compatible with all owned original games. You can also rip them to HDD using the wode software.
Some people keep there Wii's upto date by updating on line, something a softmodder would not do.
You can also use a particular disc to update.
If you have a D3-2 drive you will not be able to play backups, only original and off the HDD.
Hope this answers some of your questions.