8
Actually, the reason you're not seeing the changes on the server is because you're not clearing the /templates_c directory. You do not have to make any changes in the Admin panel to alter a theme UNLESS you are altering Templates that accompany a theme. The theme.html file and the templates that can be edited through the Admin>Templates section is not the same thing.
I know for a fact that the theme you are using doesn't require any changes under Admin>Templates as I once ran it on a study group site I made for my college.
Just make your changes to the theme.html file upload it, and delete everything out of the /templates_c directory except index.html
Therefore, "Update module template .html files from themes/your theme/templates directory?" should be "NO".