This feature is a diagnostic check of the hard drive and the system, and it will download and launch any new software should is be available, but the download of the guide at this time is NOT critical. The guide will download a few times throughout the day if the STB is in standby. The 322 will download the guide throughout the day using the unused tuner even if the other tuner is in use. The reboot is a necessary step after the diagnostic routines, but has the added benefit of "refreshing" the system.
Back in the Legacy days, Dish used to be swamped with calls form subs complaining about their boxes acting strangely. It was discovered that legions of subs were not getting software downloads because they NEVER EVER turned off the STB's (old software versions were conformed by CSR's who had subs display System Check). Some subs were MONTHS behind in software downloads. I personally knew of several people in this situation.
Dish CSR's had to tell those folks to turn off ther STB's for up to a half-hour to allow the download, or walk them through a forced download, And yes, this would solve the problems. STB's being left on at all times was more the norm for the Legacy boxes as installers were telling subs to do this back in those years, and subs seemed to prefer it as some of the Legacy boxes took several seconds before displaying a picture when taken out of stand by.
Beginning With the 322/522 generation this diagnostic routine was built in that provides much more information to CRS's or techs (at Dish) should they need to troubleshoot your system. It is also supposed to ensure that all subs (with the more recent equipment) get the latest software update as soon as it is available for them, thus reducing unnecessary calls to CSR's.
The "Daily Update" feature can be disabled, but as someone who did this for quite some time, I found that that box became buggy. Then I enabled the Daily Update feature and I have had none of those problems since.
If you are going to have a recording every day at the same time (say BBC World News at 3AM Pacific) that is the same time as the Daily Update, then you had best change the Update time to one when you will have no timer recordings, as the box will never go into the diagnostic mode, and you will have problems. Not having Daily Updates run on occasion is not a problem.