Do I have to install it by writing directly to the sd card or is it possible to update an existing installation by throwing your image into the .update folder?
just like any LibreElec version except vanilla, you update by tossing either the .img or .tar into the Update foldervia network or on-device over a USB storage etc. i would say much like with 5schatten
's builds for the 2 and 3, w/ first time updating, flash the .img to the SD card rather than trying to update from vanilla "Lakka" , after that as above, is all good n golden to toss either archive into the Update folder.
however if you start compiling updates yourself. big ones start from scratch (make clean & PROJECT=RPi DEVICE=RPi4 ARCH=arm make image ) initial/from scratch builds will take along time on older hardware/limited VM's so beware of that (on my System an AMD FX 8320E 16GB Ram, with a VM given only half that and a 120GB HDD Image. times are in the ballpark of 7 HOURS for a fresh image, significantly less when its a small update.