V1.7b will work on both HPH & UT3 devices.
It actually has 16GB storage.
The Android OS, userdata partition and perhaps a Linux dual-boot partition is using up the rest of the space.
There has been more than 10 firmware updates since the one you currently have on the device.
Can you check in Android Settings - About what dates they mention there?
You still have KitKat, the Lollipop firmware has vast improvements to media playback and changes to Kodi, Netflix and Youtube.
You can play 1080p Youtube and Netflix works correctly.
Kodi also supports DTS/AC3, DTSHD,TrueHD, Dolby Atmos sound without any problems.
Marshmallow firmware is also being worked on the next few weeks, so keep an eye out for that.
It should provide even better media playback.
You can follow this guide to update the firmware.
http://ugoos.net/blog/rockchip-firmware-reflashing-guide