There is another good reason for needing a USB extension cable and that is the USB plug on the dongle is very short so could be that if have an Raspberry Pi enclosure that is hindering the USB plug part of the dongle to be properly inserted all the way in the Raspberry Pi will not detect it since it is not actually fully plugged in. Using a USB extension cable with a longer USB plug part should help that issue.
Se alternative upgrade method here which does not require removing any screws or opening the case:
However, I do not believe that updated firmware will help with the symptoms described as it sounds like the issue is that the Raspberry Pi is not physically detecting the dongle for whatever reason.