The "rpm -Uvh --replacepkgs *.rpm" command installs all .rpm files in the current directory (*.rpm). You want to run that from the directory with the update files... I think there are install.sh scripts in the update dirs that will run the commands for you too.
If you install the "Update System" panel via the command line, then you can install RPMs saved on your workstation to the SME via the Server Manager. If you're going to install two or more RPMs (updates, addons, etc.), then to me installing Update System first and using that is much easier and faster.
As for the Blades, I'm not sure how the whole system works. If it takes time, which they don't have, to assemble them from RPMs or what. Some people have said that the ServiceLink customers have access to the update Blades faster. I dunno, all speculation...