So updating Nintendo firmware via system setting won't effect CFW or any of the installed games and apps?
Not usually, though rarely it can break things so that your system won't boot until a new CFW version comes out so always make a NAND backup before updating. And when a new update first comes out always wait a few days to a week to make sure nobody else has any problems. But as of right now, all you need to do is make a NAND backup and then update via the system menu. Also take the time to make sure you have a bootrom and otp dump which if you are using boot9strap (which you most likely area, unless you deliberately installed fastboot3ds) can be made by holding start+select+x before turning on the system and keeping them held until it boots, note that there will be no indication that the bootroms/otp were dumped so you will have to check your sd card to see if they were dumped.
An otp dump is absolutely necessary to recover your save data if your 3ds system should ever break or get lost/stolen and you should always have a fairly recent NAND backup and making sure to have both (and copying them to some place safe along with everything in the "Nintendo 3DS" folder) before updating is a good way to avoid possible problems later.