You arent using a VA2 Mothherboard Dreamcast are you? That could be one reason it wouldnt work.
First Id check to make sure its seated firmly on the motherboard. You might remove it and re-seat it just to make sure its got a firm connection.
You shouldn't need to update the firmware but here's a video on how its done. Just put the firmware file on the usb. (Also make sure your usb is formated to FAT32! or it will also cause problems)
Video on updating firmware
https://www.youtube.com/watch?v=eG8zrO_LoNgBelow is the order of how I have things setup on mine.
Make sure you have LAUNCH DASHBOARD.iso or you wont be able to access your Dreamcast dashboard anymore.