CiscoWorks LMS 4.0.1 was a small interim with some bug fixes and Windows Server 2008 R2 support built-in (as opposed to added via a discrete patch file). Cisco Prime LMS 4.1 would the most current version of LMS. (They changed the naming convention with 4.1.) You would be best served running 4.1, but you will need to get a new license file from the Cisco TAC for that upgrade. Whichever version you run, you should keep current with device and software updates via the LMS menu under Admin, Software Center, Device / Software update
In general, I've had few problems with Windows Update 'breaking' LMS. Every now and then something unexpected happens though. The official compatibility list (here for 4.0) doesn't list Windows Server compatibility at the patch level.
LMS is not happy about being shut down abruptly. If you need to install OS level patches and need to restart the server, it's recommended to stop LMS from the command line (net stop crmdmgtd) and wait for it to report all daemons are stopped before OS reboot. When you restart, LMS server should come up automatically but it can take as long as 20 minutes for all the daemons and processes to start.
The Java level is much more important. Be sure to run exactly the supported level, preferably installing the distribution that comes with LMS. LMS application is very dependent on Java and that is a point to watch. So you should make sure automatic Java updates are disabled.
