A radio is just that...an update for the radio.
An RUU is a FULL package (radio, kernel, OS) that can be flashed in HBOOT. In most cases, RUUs are "official" OS packages, and should only be installed by NON-ROOTED users unless specifically indicated otherwise.
**Installing a RUU on a rooted device could result in an un-rooted device (best case) or possibly even brick your phone (worst case)**
In order to use the MR2 radio, you need a ROM that is MR2 compatible. If you really want to stay "stock" and run MR2, you'll need to install the new radio and then flash this ROM in recovery:
[ROM] Official 1.70.605.0 MR2 OTA Deodexed Rooted Busybox Debloated [Link Added]
FWIW, I'd recommend installing a custom ROM over the stock OS, if for no other reason than the next update (Gingerbread) will completely break what is currently the only known exploit that allows root. If you're running stock OS (rooted or not), there's always a chance you could accidentally install the update and render your phone un-root-able.
There's some great ROMs over at the BAMF forums worth checking out...every version over 1.8.6 is MR2 compatible.
ROMs
1.8.6 = FROYO MR2
2.1 = Gingerbread with Sense 3.0 elements
3.0 = Gingerbread with full Sense 3.0
1.8.6 is probably the most "stable", but to be honest, all of these are great ROMs and perfectly fine to run daily.