The firmware is updatable yes, but that's irrelevant. The codecs are built into the Sigma chip -- any codecs the chip can't decode when it leaves the factory, support for them can't be added at a later date, by either Sigma or WD.
Even within the codec itself, nothing can be changed -- h.264 supports up to L4.1... support for L5 and L5.1 can't be added -- a new chip would be required for that.
If you were encoding things yourself, then there's no worries, since you can be sure that you always use codecs and settings that are supported. If you're downloading things randomly, there's no control over whether the settings used will be compatible or not -- some files will play and some won't -- that's just the way it goes.