If you are trying to update Over the Air (OTA) via the Settings app on the iPhone, it is going to continue to prompt you for the wifi. To be able to update via your Ethernet, you need to connect the phone to the computer and iTunes via USB. After that, and selecting the device in iTunes, you click on the Update button in iTunes, not on the iPhone. That will do it that way.
I'm not aware of what you are describing as contacts disappearing from the iPhone contacts list. Are you syncing your contacts via iCloud or some other cloud service, or do you sync them via iTunes to a supported application on the computer?