No, it just wipes out anything you've downloaded or entered since you got the phone. Since the update is in the system area of the phone, it won't get touched. (If it did wipe out "the update", doing a factory reset would leave you with a dead phone, because there isn't an "original firmware" and "update" separation - the update becomes part of the firmware of the phone.)
Doing a factory reset is good if you're having flakey operation or terrible battery life after an update, and clearing the system cache (which doesn't delete any of your apps or data) doesn't fix it, but it's an extreme measure. You have to do a full backup of the phone (see
Backing up an Android Device) before doing a factory reset, or you lose everything. You end up with a new, out-of-the-box phone with the update version of Android on it and all your pictures, music, contacts, notes, etc., gone.