I was using a 32GB usb stick, and I tried both FAT12 and FAT16, neither worked.
What did work is I had a really old 1GB USB stick lying around, and when I used that, it worked immediately. I also formatted/partitioned the 1GB stick to MBR/FAT16.
This seems to indicate the device is very sensitive to what USB stick you’re using, so field upgrades via USB is not really feasible unless Arylic can provide a list of tested USB sticks.
That caveat aside, ARC output on the TV seems reliable after the update, and disabling ARC CEC standby seems to persist across power cycles on the B50, so I’ll be keeping the device personally, but find it still difficult to recommend to anyone without big asterisks on the recommendation due to the USB support problem with upgrades.