Technically using AME from the pre-built ISO is illegal, however realistically no one will ever go after you for it, unless you're a business. You can however legally do it by self-ameliorating and entering a key before the amelioration process.

It does lack Windows Update yes, as WU is a threat to privacy. Windows Ameliorated helps mitigate this by shipping a non-administrator user account by default. Of course you can still do admin actions, it just requires the admin password. ~70% of Windows vulnerabilities are caused by using an admin user (Source: https://web.archive.org/web/20210618023509/https://www.beyon...)

P.S. Personally I think security updates are a bit overrated, as in all practicality, there's extremely little chance of getting attacked unless you download FreeFortniteVbucks.exe