Updating Espruino Bootloader

So what's the point of combining the espruino bootloader in the firmware? to only offset the space for espruino runtime ?

Yes, but also to make sure that if someone does update the firmware using Serial (or DFU on the Espruino Pico), they get everything they need.

Shouldn't the "advanced flashing" overwrite it and normal updates should not overwrite?

The USB bootloader (which exists so that the Web IDE can update firmware without any extra tools/drivers) is actually incapable of overwriting itself, as @DrAzzy said. Making it do so would actually require some pretty major hacks (like writing a new bootloader into RAM and jumping to it). It's work that's not really worth doing, because as you say most people who need to do it would have the capability to just use the UART.

Also, if you could overwrite the bootloader, you might be unlucky and choose a build where the bootloader itself was broken - 'bricking' your Espruino. At least requiring people to use a USB-TTL dongle to update the bootloader ensures that they also have the tools to fix their board if something goes wrong!