To answer your questions:
1. NASLite won't format it again if it already has a valid partition. (unless you tell it to!) It should just say DISK-1 mounted successfully. You still get all the logs (at least I do) NASLite only seems to care if it's already formatted or not. If you use a partition manager and format it as a linux partition it should be recognized by NASLite+. If you accidentally tell NASLite to initialize that disk, it will probably wipe out the little DOS partition and use the whole disk. This is what Tony was warning about. If this happens you will have to go back and remake the DOS partition and reinstall the system, syslinux, and the NASLite+ files. I haven't tried to configure an already configured disk, but I assume Tony gives you a warning message about loosing all the data on that drive if you continue.
2. Upgrading should be as you described. Just copy the new files. You will probably only need to copy the NASLite.01 and .02 files. This is for version 1.x of NASLite. Version 2.x may be different and handle partitions differently. We'll have to see.
Tony's comments about using USB were just an additional (supported
) way to boot without using a CD drive and allowing you to use all 4 ide channels. It's your choice if you want to go that way or not. My motherboard doesn't have usb and I was to cheap to spend money for a usb card and usb memory
so that's why I spend time figuring out how syslinux works.
One final note, your bios will have to see the drive you plan to boot from, and report it's size correctly. My NASLite+ box had an old 2.5GB drive, so it wasn't an issue. If you plan on using all 500GB drives it may be a problem with the bios.