Ok.. I have an answer for myself. The answer is NO. Updating software with dual management modules cannot be performed with out a reboot... i.e loss of service. Here is why:
My switch is running in "non stop switching" mode
When you update the active primary flash with new software the changes are replicated to the standby. You are then instructed to boot the standby with "boot standby". When you reboot the standby module the software version becomes active... great, right? Well now because "non stop switching" requires both management modules to be on the same version you are informed that you are no longer operating in "non stop switching" mode but have been set to "warm standby" because ... since the standby reboot you now have different software versions running on your two management modules.
According to the manual performing a "redundancy failover" at this point will result in loss of service because the switch is operating in "warm standby" mode.
So from this I am guessing that there is no way to perform a "hitless" upgrade of software for the 8212. If anyone knows a way around this please let me know.