In Windows terms, rooted means that you have administrator access. That's it really. You may have a custom recovery program installed as well ("recovery" is one of the options from the white hboot menu - if it says anything about "ClockworkMod" or "TWRP" then it's a custom recovery). If so, this gives you more options than the standard HTC recovery (which doesn't let you do much more than a factory reset). But that's all it means really - you can change things you couldn't change on an unrooted phone. You should take a bit more care, same as when running a PC from an admin account, but that's all.
While in this state you cannot accept updates from HTC. People who are using custom ROMs (software developed by independent developers rather than HTC) generally update by installing a more recent ROM - usually we get updates before HTC distribute them. In fact the custom software you are running is already Android 4.2.2, which is the same as the latest HTC software.
If you do choose to unroot and return to stock, the RUU clsA has posted should work if your phone was originally unbranded. I've not been able to find any UK network-branded RUUs in my usual place (shipped-ROMs.com
), so if your phone was originally sold through one of the networks then as clsA says you may need to perform further modifications in order to run the RUU! Don't worry about that though, we can explain what's needed if you want to do that.
To run the RUU, the simplest way is probably to put the phone in fastboot mode (one of the options from the white bootloader menu). Then connect to a Windows PC via usb, and run the RUU .exe on the PC. You will however need to relock the bootloader before you can run the RUU. That will require setting up "fastboot" on your PC, which you do by downloading the mediafire link in the first post of this thread
and following the instructions in the first part of the second post of that same thread. You can then use the command "fastboot oem lock" to relock it (if you read that thread's unlocking instructions it will explain how to use a fastboot command). It's pretty simple for people who rooted it themselves, because they've done all of that setup already, but less so in your situation (one reason I don't think people should sell rooted phones without at least checking that that's what the buyer wants).
I've not used the HTC backup stuff, so don't know how much it backs up. Probably it does all you need, I just don't know, so I'd suggest checking what it does back up. If your contacts are saved as Google contacts and you have contact syncing enabled those are already backed-up to your GMail account.
Finally (this post is skipping about a bit!), all a factory reset does is erase user apps and their data and set system settings to default. It does not change system software in any way, so will not unroot the phone nor replace your custom ROM to a stock HTC one. If that's what you want, the RUU is what you need.
Sorry there is so much of this stuff!