Yes, it says it will delete altered save games (Twilight Hack). You can't reinstall it if you update either. Use the workaround posted by shammack, if you want the update. I could care less about adding Miis to the Mii parade. There's not much else Nintendo can do beyond this to stop homebrew, any other steps could potentially brick some Wiis, and they don't want to get into that. They spent the past 3 months testing this update, and the *only* new feature is putting Miis in the Mii Parade, and blocking the Twilight Hack *without* bricking anyone's console.
Edit - yes, it does block the Freeloader and "trucha signed" discs (hacked Guitar Hero 3, etc.), but that code was added a long time ago, this update just makes the system use it.