You update simply by installing. You can monitor progress below to see what goes into a nightly build.
forge.joomlapolis.com/projects/cb/issues
All tickets marked solved are in latest nightly. A ticket is created for every merge request into CB master branch so nothing can change in CB without a ticket. You can sort by % Done to sort with most recently solved tickets first.
No you shouldn't lose any settings and yes you should always backup before installing an update on a live site.