When I play a game, most games put up a message saying software update version 1.02 (for example). Press X to continue or O to cancel. Should I allow the update or will this also upgrade my firmware? I did this for God Of War and it updated my firmware to 3.42 and I had to downgrade. Will this happen for all games that ask to update? If so, how can I get the game update without getting the firmware update?
No, it should not update your FW. (Very weird that it happened to you!) I have done several version updates and to date never had the FW update automatically.
What you can do, is look for the PKG's of the games you wish to update, download with PC and then install it through the GAME menu on the PS3.
Whether it will happen again (what happened to you with GOW), is unlikely and I don't think anyone can say for sure.
If you are worried that it might update your FW to say 3.55, then rather don't connect your PS3 to the internet. Somewhere under system settings, you can disable the internet connectivity (seeing it is reduntant if you JB your PS3 ... well ... with the exception of updating multiMAN online)
You don't have to completely disable the internet connection. If you manually enter the information in the network settings, you can just put random numbers into everything except the ip address/subnet mask fields. That way you can still use ftp server and a media server with your ps3.