Hopefully this will answer some of your questions.

The Pen Drive Sound and style update from last year did not rely on 'incremental updates' and could be installed over any previous OS version, (even the very first V1 Audya's). Surely everyone made use of that update? If not they should do so as the keyboard was greatly improved. I would say if they did not update then they would not be worried about making use of V4.2 either.

The Audya utilizes streaming technology which is why it cannot operate without a Hard drive. The Audio Styles take up large amounts of disk space and these are read from the disk in real time in the same manner your computer plays MP3 or video files. Tyros still utilizes traditional midi files for styles which are tiny and can easily be stored in rom memory.

DVD restore disks are available from your distributor (or at least they should be) and can be ordered by request. Any sensible distributor will carry restored DVD's and up to date back up hard drives too.

If your Audya does not communicate with your PC or MAC then it may be set to Midi Host mode. Check:
MENU -> MIDI (F2) -> UTILITY (F4) -> USB MIDI
If it is "ON" then you will not see the Audya Hard Drive when connecting to a PC. Otherwise there is a good chance your cable is bad or your computers USB drivers are corrupt. This sometimes happens if you have removed a USB drive without using the safe removal procedure (rebooting the computer often does the trick)

Audya will connect to Windows 7 (I use it).