Updates on Local Network

Yeah - this is a great option. It does not entirely stop getting stuff from internet as it is basically a torrent system, but is much faster and much reduces download demand

A torrent system basically extacts bits of a file from multiple sources, so each serving pc does not have to upload whole file (uploading usually being slower than downloading), and receiving pc glues it all together again. So you might get 5 pcs uploading a fifth each of the file at the same time, and pc can download all five parts simultaneously as download is usually several times faster than upload. It actually works in much smaller increments, but the principle is the same.

I always update my fast pc first, leaving my other slower devices switched off. Then I turn on other devices, and you see the hdd flicking away as it serves the updates to the other devices.

Do not enable last option as it will 'steal' bandwidth from you.

I am not sure about this setup. Just a WAG, but it seems to me that each computer needs to be able to talk to MS WU to learn that updates are available, (and therefore be connected to the internet); then the settings take over as to where those WUs come from. Like I said, not sure and just my opinion, but that's how I would think things would work.