Is it recommended to replace (install through windows update) IE8 to IE9 in Windows7? Does it really entirely replace IE to newer version a on given system? (also Windows Explorer?) It seems that IE is tightly integrated with the system. I don't know that I should install IE9 or cumulative updates for IE8 - which method do you use and which brings less trouble?
Recommended by who?
From a security standpoint, being up-to-date to the latest stable version is a must. And for that reason, you should update to Internet Explorer 9, which has become stable 2 months ago.
As for core stuff, either Internet Explorer or your Operating System will update them; that's why it is important to not just update one thing, but everything you can.