I've been following your conversation on this. Still wrapping my head around it. I understand the library concept. What I don't understand is the extensions question. But let me try...

If I have an extension not supported by JMS, I can still use it, but I'll need to load it into the library and the slave. So, when an update comes out, will I need to update it in the library and the slave?

The concept of JMS is to share the joomla application (php code) and therefore share the extension php code.

To install the PHP code of the extension, you have to install the extension in the master website.

The extension are also using data that is generally stored in the DB tables.
The tables are created by the extension when you install it.
When you install the extension in the master, you have the tables created in the master but not yet in the slave sites.

To allow a slave site using the extension, you need to create the tables.
This can be either done with the re-installation of the extension in the slave site to let the extension create the tables like for the master.
OR use the JMS Tool menu that contain the definition of a list of extension with their tables to create. (In fact, this copy the tables from the website to replicate or from the master).

When there is an update or upgrade of something.
You need to distinguish the type of modifiction.
The update generally means bug fix and does not impact the DB table structure. So the update can be done in the master only.

When there is an upgrade, this generally mean that new functionalities are provided and that table layout structure can be modified or new tables are created. In this case, you need to re-install the extension in each slave site to let the extension itself perform the db layout modification.