Haven't changed any of the settings I mentioned above but I have however managed to disable the updates.
SYSTEM VER 2.4.33
FROYO 2.2
rename /system/app/BlurUpdater_VZW.apk to .bak
rename /system/app/BlurUpdater_VZW.odex to .bak
rename /etc/security/otacerts.zip to .bak
when naming these don't replace the extension w/ .bak just append it to the end OK
Tested by going to settings->aboutphone->updates screen flickered (normal) no popup. Seeing that the message said the update had been downloaded already and was ready to be installed, I believe it is time to find where the update was downloaded to.
Not sure if this is going to cause other troubles will search market for updates for other apps, reboot and check updates in market and stuff we will see. Found something I would like to look into more though it's called FOTA.
Not sure but does anyone else think it is possible to figure out how this updater works so when I press this little updates button when I am on my local network it will pull up a list of updates from my server and allow me to choose what to install, full package, partial pack, fixes, bugs, give me options man. I am not ready to test any roms yet, until I get this working exactly the way I want it.