An OS update won't improve your connection quality unless it also contains updated radio firmware (which it might). It's worth a try and won't hurt anything. If the phone doesn't work with your SIM card and isn't unlocked so that it will work with your SIM card, then you should dispute the transaction with eBay and return the phone. If it does work with your SIM card (you can make calls and access data) but it prefers T-Mobile over your carrier, then it's harder to say how to deal with the problem. If your carrier prefers to use AT&T towers, then the phone should follow that. But H2O might be small enough that the phone doesn't have info on how to work best with your carrier and SIM card.
-------------------- Lisa Gade Editor in Chief, MobileTechReview