1) Whether you do a factory reset from Settings or from booting to recovery, you're doing the same thing. Recovery is just a mini-Android.
2) The reason to do a system cache wipe after an update is that the update will almost certainly not be using the data in the cache, and will have to wipe it, little by little, wasting time and battery, so do it once and get it over with.
3) No reason to do an update, then a factory reset. If you want that condition, install the new version ROM (IOW, if you're updating from 4.4.4 to 5.0.2, just flash the 5.0.2 ROM) after a total wipe. It's a whole ROM, no chance of a glitch caused by something someone overlooked in the update. The end result is going to be the same - an out-of-the-box phone.
It's like washing the car before bringing it to the car wash, though. Unless things start crashing, a cache wipe (and you can do that from Settings) is all you need after even major version update (like 4 to 5).