The next update is a small update and can be done over the air. Their will be no need to restore the iphone when it is released because the phone will handle the update for you.
I haven't done this yet but from what I'm reading all you have to do is tap update and wait for it to be applied. Once it is done your current settings, changes, files, etc. should be on the phone as they were before the update.
Also start a different thread for smilies. You'll have better luck with a dedicated thread in the right forum.