1. Go to System Settings and update like normal.. you need internet
2. yes 5.5.1 let's you go online with your legit games like disc and eshop titles, with Loadiine only Super Smash Bros U supports online atm, with NNID im not too sure if you need to create one but once you connect online you will know as it will ask anyway if it is necessary.
3. playing game backups legal or illegal will not ban you, unless you are using cheats or modifications to the original game
*anyone, if i am wrong, i don't mind to be corrected pls go ahead..
and, if you have done everything, pls make sure to block further updates from Nintendo servers to be able to benefit any future hack on 5.5.1
edit: sorry i forgot to include the steps needed to keep the homebrew still running, there are several ways to update your old files, pls refer to guides here on 5.5.1 hacks..thanks