Will “Erase All Content and Settings” update my iOS to the latest version? I am currently on iOS 8.4.
No, "Erase All Content and Settings" will not update your device. Your device will remain on iOS 8.4.
Excuse me being late to the party.
I'm an avid JailBreaker myself, and I am on iOS 8.4 like you.
8.4 is the highest iOS I believe that's JailBreakable within the 8 Range.
iOS 9 is currently at 9.3.5, which is not JailBreakable.
iOS 10 apparently may have difficulty being JailBroken in the future, JailBreakers say it's a much harder challenge than ever before.
Using 'Erase all Content and Settings' on your iPhone will cause the iPhone (if jailbroken) to erase all its contents and settings. Your tweaks, apps, everything. The iPhone will be as if it came fresh from the box.
HOWEVER. Jailbreaking your iPhone modifies the iOS structure, it adds, changes and deletes files and folders in iOS, and the iPhone's local reset feature isn't aware of this.
If you use the 'Erase all Content and Settings' option, your iPhone will either BootLoop, or it will restore correctly.
If you're lucky for your iPhone to restore correctly, when you rejailbreak it, Cydia also has a chance to fail installing properly. Thus every time you try to open it, it crashes.
There's no current fixes I am aware of when this happens, other than to update / restore your iOS to the latest firmware. (Which you do not want.. obviously.)
If you want to Erase all your Contents and Settings and KEEP your Jailbreak on the iDevice I recommend these programs;
SemiRestore (Computer Program)
CydiaImpactor (Cydia Tweak)
iLexRat (Cydia Tweak, Requires 'Mobile Terminal' Tweak to use. Refer to online instructions)
I also recommend;
As this tweak will make your 'Erase all Content and Settings' button turn grey, so you cannot accidentally screw up your device.
I've used iLex Rat and it has worked for me most times, depending what you do to your iDevice results can change and you will need to Restore.
If you use iFile, chances are you're modifying your firmware directory and system a lot.
If I was you, if you have a problem with your iDevice, then I suggest you;
1: Turn off the Phone
2: While holding Volume Up button, turn on the phone, keep holding the button
3: You will enter 'Substrate Mode' all Tweaks will be inactive.
4: Go to Cydia
5: Download and install Tweak 'CrashReporter'
6: Use your device until CrashReporter notifies you of an issue.
7: Find and uninstall all the Tweaks you think you're having problems with.
I hope I've informed you enough, and... hopefully I'm not too late and stopped a catastrophe.
Remember, only do a 'Restore' or 'Erase' of your JailBroken iDevice if you have absolutely no other choice. Avoid it like the plague.