Only works on rooted android devices! I tried on android 4.0.4 - and it works!
1. To Turn Off System Update Notification only!
a) Install Root Explorer (File Manager) app; make sure to give root access and/or mount read/write in your Root Explorer program (In Root Explorer you must allow superuser access when first opening the app, and then make sure to click "Mount r/w" at the top which will allow you to edit files).
b) Navigate to /System/Etc/Security and rename the file "otacerts.zip" to "otacerts.zip.bak (standard notation for disabling old files).
The only thing you make here is to move the certificates of OTA validation to other file (the ".bak"). So, when your Device download an OTA update, it will check for its validation through the certificates; it will not find them (because you moved them to the ".bak"), so it will discard the downloaded file. This ensured you will never see the OTA's popup, however, the Device will stay trying to download the OTA update again, and again, and again... That means you will always have some network traffic here.
2. To stop android device downloading system updates.
a) Install Titanium Backup PRO Key ★ root!
b) Go to Titanium Backup PRO Key... then press the Menu key...then click Backup/Restore...
Scroll down to Updater 4.0.4... freeze it! go to Upgrader 1.0.0 freeze it as well.
Freezing would be better then deleting..IMO.
c) Restart Device. Done. Enjoy your Android Device!
NOTE: I found an entry in a forum talking about Some android users, - Forces there System Update using Google Services Framework to forced.
Go to Settings > Apps (or Applications) and select show All. Then find Google Services Framework and click the Clear Data button. Then click the Force Stop button..
After Forces Google Services Framework, - it can crashing all google apps: gmail, maps, market, phone, talk etc. --------- which is not good idea. I'm not RECOMMENDING TO Forces Google Services Framework.