you don't need a stick, u can flash from your hard drive. the bios utility has full NTFS support. Some people have claimed flashing from NTFS can cause errors, IMO its nonsense. NTFS is a journaled file system, its not possible withought a corrupted file to start with.
the windows update program is part of AI2 suite, youll need at least the suite on the CD that came with your board, or download the newest from Asus. It sounds like you might have installed an old stand alone version, or the original AI1 suite that doesn't support P67 by accident.
youll need the actual AI2 suite installed to access the flash program. You don't have to install all the components though, just the ones you want. Its accessed through the suite executable, not as an individual utility.
if u flash from bios, youll need to rename the file, the default is .rom which is only for the windows program. i believe .bin is for the bios flasher.