Will OTA (Over-the-Air) updates download when tethered? I have a wifi-only iPad, and I understood (or, have heard) it will automatically download iOS system updates when connected to wifi. 

Will iOS automatically download an OTA (Over-the-Air) update when it is tethered to an iPhone (via iPhone wifi or bluetooth)?
Yes, you can download the update while tethered to the iPhone via WiFi.  But to clarify, it won't ever automatically download the update without user intervention.

This article from OSXDaily details some further workarounds to this issue.