when you flash a new rom you are completely removing the old one (including the update) and replacing it with a new one. one does not need to "work with" the other.
i often wonder why people go back to stock just to receive an update when they then turn around a flash a custom rom. perhaps they also think that the updates are "permanent" and stick with the phone even after flashing custom roms.
cyanogen mod is coming along nicely and is just about ready for prime time.
i think you will like it but know that there are still some bugs to work out.