Glad you are enjoying your new AW watch! Very cool.
Yes, I believe they can be rooted. I'm not sure of the process, or what you gain from it but I think there are some posts around her about it.
AW watches update similar to phones. In the Settings menu > About > there is an option to Check For Updates to manually check for new updates. Or, your watch will also automatically check from time-to-time and notify you that a new update is available.
Keep in mind that the LG G Watch was the first (or one of the first AW watches ever made) and newer watches do offer more functionality. The G watch is still fully capable and an awesome AW watch, but it is an older model and newer ones have a few more options.
I don't believe Notification sounds can be set for watch Notifications since the watch only vibrates. It does not have an external speaker, that I am aware of. It just vibrates for each new Notification.