Answer to first part of question is curve chain rule works to chain curves of same feature that of seed curve. So if you have Sketch with 4 end to end connected curves then providing any curve as seed curve rule is expected to grab all four curves. If you have four Line features which are end to end connected then this rule will only chain one curve, which is same as input seed curve.
I will suggest you recording journal to see difference on what happen in above two scenarios.
One second part I will advise not to use WoUpdate option and leave it to default setting.