Hi Eric
This flag has caught out many a developer. It will do exactly what the flag says. Once the flag is set to 'not update', the UBE will NEVER update (add, change nor delete) data. The report will not error, it will simply ignore the statement(s).
When in doubt I would leave/set the flag as 'Update report', unless the UBE is 100% used for reporting only.
Once set, this flag can not be changed either (other than through SQL (siomit in F9860).