|To address your points:|
1 - beta releases - correct, you should not use them unless you are prepared for problems. Betas are "pre release" meaning they aren't 100% finished yet.
FYI, IE8 is complete now, that is, it has been officially released.
2 - very good point. It is true that you should usually not mess with things that are working. However, since you use IE as your browser, it is important to make sure it is secure. An important part of doing that is making sure it is fully updated, even if you don't like the new version
3 - very easy to do. If it works, don't touch it...I try to live by this also.
4. It doesn't matter if you have automatic updates on or off, as long as you occasionally visit Windows Update you should be mostly secure.
Before trying any 'major' updates like IE8 or SP3, you should back up important files, and set a system restore point. This way, if anything goes wrong, you have options for helping you recover (backups mean if you have to reinstall, unlikely but still possible, you would be able to get your files back. a restore point means you can try to undo the update if it goes wrong)
Firefox is not perfect, and I didn't really mean to advertise it here. I more or less was using it as an example. Still, it is generally regarded as being "more powerful" than IE by many, so it's worth trying. If you don't like it, you can always switch back to IE, but of course keep it updated if you do :)