Hello,
It is possible upgrade firmware with the SD card inserted, however, when used as a memory expansion device, SD card is considered as a singular flash memory unit with device's internal flash. Thus during firmware update necessary partitions and configurations might be split between internal flash and SD card. Data stored on the card can become inaccessible after the update. Thus, flashing firmware with the card inserted might result in bricking the device without the possibility to login to it, with the only option to restore the device being via bootloader menu procedure.
Best regards,
Žygimantas