Sure, this is possible. In the download site list in wyBuild use
%updatepath%/%file%
instead of
http://yousite.com/updates/%file%
When using the %updatepath% variable then you can fill it with whatever location you want (like a local file path on a USB stick). You just pass the -updatepath commandline argument to wyUpdate.exe when you run it. For example:
wyUpdate.exe -updatepath="file:///j:/path/to/updates"
Note: I used "J:/" as the USB drive and the update files are stored in the "path\to\updates" folder on the USB drive. Also note that forward slashes (/) are used, not backward slashes (\).
Short answer. Yes this is possible.
Tell me if you have any questions.