Yes, there is a menu item under maintenence called "Reinitalize" that resets all the player's settings to their default settings. Since I haven't encountered any problems in updating I have chosen not to do this to avoid having to reset all my personalized settings. All of my firmware updates worked fine without Reintializing. Others' results may vary.
Yes, I have my player permanently connected to my router. They are both conveniently located in my equipment rack in my home theater. The main reasons for continuing to maintain this connection is 1)to permit downloading extra content for HD DVDs, or 2)to permit downloading new firmware updates.
Since there's very little likelihood of a new firmware update and studios are no longer producing new HD DVDs, the only reason to maintain the connection in the future would be in the event you purchased a previously released HD DVD that had additional downloadable content. There are not many titles that have been released with additional downloadable content, so as your HD DVD collection nears completion there is very little reason to maintain the Ethernet connection in the future.