Hello! Welcome to the forums. 
From what I’ve gathered, performing the update from 0.4 to 0.5 is something that is more of a “power” used option, and one to use if you have a lot of data you want to keep. It also seems to be fairly hit and miss, depending on how the user has their system configured.
The definition of update also seems to be a bit confusing. The update option in the main menu is just to update the “launcher” and not any of the underlying OS.
The update from 0.4 to 0.5 is a script that you run.
The files included to be downloaded are an entire disk image to be flashed onto your SD card, erasing all of the contents in the process.
In general, I would say it’s better to just start from scratch, and flash a new image.
If you’re new do the forums, and disk image writing, I can see how finding clear instructions could be difficult. It’s something a lot of people just take for granted.
Here’s a link to a post containing some instructions for writing disk images. Scroll to the drop down menu under the heading “installation”
Note: the entire contents of your SD card will be wiped if you do this, so back anything you you want to keep.