I'm not sure why an Android update couldn't be done via the internet; my AVOV box did an full android update via the net one time, so it can be done.
As far as installing the update, I doubt it will be an APK file since it's not an app, it's the operating system itself. I also doubt we'll be using the app installer to update the operating system since it's not an app. I would imagine the offline update would have to be done via either a reboot with a USB stick inserted with an android boot file on it (probably a Linux boot), or we will have to push the reset button under the box and boot up to the reset screen where there is an option you can select to install files from USB.
