I don’t know the m200 series in particular but, from what I’ve read about other Sansas, I doubt that updating the firmware will, barring some hardware problem, delete your music files.
One possibility is that the files are there, but they don’t show up in the database because they don’t have ID3 tags.
Have you tried connecting the Sansa to your laptop in both MSC and MTP modes to see what’s there? Also, if the firmware includes a System Info option, as it probably does, what does it tell you about the amount of memory used?
