Yes, you should update IE7 with security fixes. Many aspects of Windows use the underlying components of IE, especially Outlook Express 6. Note that Firefox does not use IE components to display pages, so if Firefox is slowing down, that would be for some other reason, to be determined.

I use only Firefox

 I use Firefox and only Firefox. I do not use Outlook express and I use very few windows    programs. Is it necessary to download and install all of the updates they send me. Except for banking, eBay and other household expenses I do not use the computer for business. 
 
  Other then taking up space and time why install them?

  The computer ran fine when I bought it.

Security updates are annoyingly frequent, but in addition to protecting your own data, they can help prevent your computer from being enrolled into botnets or otherwise used by others for their own purposes. Everyone has to make their own decision about how much risk they want to take. If you are good with backups and wouldn't lose business if your computer was down for a few days for a complete rebuild, then maybe you can do Microsoft updates every few months rather than every month?