If you don't feel the need to update then don't! (I'm still on 3.71 M33-4) If anything your PSX emulation compatibility will be improved by the access to three additional versions of pops. Savegame-Deemer will get around all issues of save games corrupting as you switch firmwares (of course you'll need to use it on your current firmware which the saves were made on).
All the other homebrew should work fine...the kernels remain essentially the same. Snes9xTYLsmcm Test 5 27/05/08 is about the best there is (especially in conjunction with a good Speed Hacks dat).
If you do run into any problems you can get back to your previous firmware very, very easily by using Hellcat's Recovery flasher. (No pandora needed!)
All the other homebrew should work fine...the kernels remain essentially the same. Snes9xTYLsmcm Test 5 27/05/08 is about the best there is (especially in conjunction with a good Speed Hacks dat).
If you do run into any problems you can get back to your previous firmware very, very easily by using Hellcat's Recovery flasher. (No pandora needed!)