To the best of my understanding, and someone can feel free to correct me if I'm wrong, an Android device has several partitions in its filesystem. The operating system and other files that shipped with the device, such as stock apps, are kept on /system, and anything associated with user settings and user apps is kept in /data. As I understand it, factory reset simply wipes this /data partition. Any sort of firmware update overwrites the /system partition with the new version. Thus, if you do a factory reset, your tablet should be cleared of any apps and settings you installed and changed, and the firmware will still be the latest update you have installed.
To the second question, I know that you can wipe after an update without affecting the firmware version you have, however, I'm not sure exactly howy wiping fixes problems, so I will leave it to someone who knows a bit more to explain the pros/cons of wiping before/after updating your firmware.