Explain the N-rules in hook_update_N
Basing on the documentation, 70xx updates are only necessary if there are updates from Drupal 6.x to Drupal 7.x that are necessary for any branch the Drupal 7 module has (e.g. 7.x-1.x, 7.x-2.x, 7.x-3.x). If that is not the case, then you don't need to use 70xx as update numbers.

As said in the documentation, updates numbered 72xx allows updating from the 6.x-2-x version of the module to the 7.x-2.x version, but not from the 6.x-3.x version. This is generally not a problem, since project maintainers normally create a version 7.x-3.x together a version 6.x-3.x.

As the documentation reports, updates numbered 71xx are for updated from version 6.x-1.x to 7.x-1.x; updates numbered 70xx are for updates from Drupal 6 to any branch of the module for Drupal 7.x. You don't copy the 70xx updates in 71xx updates, since those are already executed for the 7.x-1.x branch.

As for the updates to keep, the documentation says:


  A good rule of thumb is to remove updates older than two major releases of Drupal.


So, updates for a 7.x-1.x version should still be kept for a 7.x-2.x version.

Keep in mind that, as far as I recall, what described in the documentation about which updates are run when updating from Drupal 6 to Drupal 7 doesn't describe what the code actually does. For what I recall, Drupal code simply run any updates higher than the last executed update. For example, if a module last time ran its 6123 update, Drupal will run any update higher than that number, such as 7000, 7100, and 7200, if they are defined.