1: You can update a live USB install of Fedora if you have persistent storage enabled.
2: I have very rarely had an update to completely break my system. IF a kernel update has problem, yum defaults to keeping 3 kernels installed, so you can just boot to the previous kernel. Most of the issues I have seen with kernel updates were when people had kernel modules that they had built (Like nvidia, etc..), and didn't realise that kernel modules have to be rebuilt every time you update the kernel.
Most of the time, if a package gets updated and has a problem, the problem package can be removed. However, if you still feel a little leery about the updates, you can wait on the updates and watch to see if people have problems before you update them on your system. It makes the updates more of a manual process, and you would have to pick and choose the updates you want, but it's an option.