1. Can someone clearly tell me what masterupdating is doing besides turning all of my esps into esms?
When Master Update Mode is activated, the following operations are performed without further user interaction:
-> All modules in the Data folder are assigned into 2 groups, masters and Plug-ins, based on their file extension (.esm or .esp).
-> The modules in each group are sorted by file modification date/time.
-> All module files are re-dated, first all masters, then all Plug-ins, in 1 minute intervals.
-> All active modules are then loaded, the ESM flag set in the file header if not yet present, and the ONAM sub records build if required.
-> Any temporary overriding world space record that has at least one previous version that is persistent is marked as persistent.
-> All modified modules are saved.
This process will result in a better-integrated group of mods, and will likely result in less crashes than without having run Master Update Mode.
2. What sort of mods shouldn't be masterupdated (read that masterupdating some mods cause harm), meaning what changes to a mod do I look for so I know it can't be masterupdated?
All of the mods in your load-order are MasterUpdated at the same time, its automatic and not something where you select X or Y mod to MasterUpdate, the entire mod-list has to be processed in order for it to work. I have not experienced issues in which MasterUpdate broke mods, rather the reverse in that it makes stuff work again that may have been broken. You still need the Merged Pathces; such as Mez's merged patch and the FOIP patches are Very important (more important than MasterUpdate, but you still need both).
3. Is it possible to select only the moods you want to be masterupdated, while it leaves the other mods that shouldn't be master updated, alone? If so, how?
The entire load-order list is processed at once. The tutorial can be find via the link in my sig.
Cheers,
Miax