It is NOT expected to freeze, at least it never did it here. It will usually reboot twice, one right after applying the update from OS X, and the second while its loading for the first time, but it will reboot on its own, not freezing your machine.
The dontstealmacosx.kext doesnt really need to be deleted, but you need to have dsmos.kext or AppleDecrypt.kext installed of course.
I dont know if you need to boot in single user mode, maybe thats whats preventing the update to complete...