Doesn't matter now, you're already banned.
emuNAND is normally used so that the sysNAND can be kept clean for legit stuff.
It provides some brick protection, since software running on your emuNAND can't touch your sysNAND, that includes malicious NSPs. But with RCM you already have good brick protection anyway as long as you don't lose your NAND backup.
Since you're banned anyway there's no reason for you to use OFW at all, you could run everything including cartridges on emuNAND, and benefit from the brick protection it adds. It costs you about 3 GB of space (the rest of the space it takes up you can install games to) so it might be worth it, but it's not that important. Just have a NAND backup stored somewhere safe if you're running CFW on sysNAND as malicious NSPs/homebrew do exist.
I never choose the exFAT option. Nobody should use exFAT on the Switch anyways so it doesn't really matter what you choose.
If you update the firmware first you probably won't be able to boot CFW until you update that too, but it won't do any harm, still it's best to always update Atmosphere/Hekate/
sigpatches first.
If you have any content patches like sysmodules, custom themes or whatever else, you might get a black screen on boot like I did after updating Atmosphere (before I updated the firmware even), if that happens don't panic, just delete SD:\atmosphere\contents and reinstall any sysmodules or any homebrew you have that adds stuff to that folder.