I noticed in Magic.xml in the CombatLib a function:

 <function name="UpdateSpells">
 </function>

Does this get filled with code in game?
What is the function's function?

It is a function you can override to do stuff in your game. For example, if you add a second inventory pane to act as a spell book, you can have this function update its contents, as described here:

https://github.com/ThePix/quest/wiki/Second-Inventory-Library