It is OK to update the firmware of the OBi2 series and OBi3 series via WiFi. That said, if your WiFi network is very slow and/or lossy, you may have greater success using Ethernet.
Thank you - Obihai Support Team
If you have the USB wi-fi dongle, make sure you connect an ethernet cable before clicking on the auto update f/w feature of your Obi202 on ObiTalk.
If you don't connect via ethernet, it will fail and you will lose communication until you re-connect an ethernet cable. Make sure it is connected to the "internet" port, not the LAN port.