Firstly, let's make the convention that $x = x_1$ and $x_1^{(i)}$ expresses the value of $x_1$ at the $i-$ row (see example) or equivalently $x_1^{(i)}$ is the value of $x_1$ of the $i-$th training example. We notice that $x^{(1)}_1 = 1.$ We denote $^{k}\theta_j$ the value of $\theta_ j$ after $k$ updates (i.e. after $k$ repetitions of the algorithm). After one update we have:
$$
\ ^{1}\theta_{0}:= \, ^{0}\theta_{0} - \frac 14 \bigg[\left(^{0}\theta_0+\,^{0}\theta_1x_1^{(1)}-y^{(1)}\right)\cdot x_0^{(1)}
+ \left(^{0}\theta_0+\,^{0}\theta_1x_1^{(2)}-2\right)\cdot x_0^{(1)}
+ \left(^{0}\theta_0+\,^{0}\theta_1x_1^{(3)}-y^{(3)}\right)\cdot x_0^{(1)}
+ \left(^{0}\theta_0+\,^{0}\theta_1x_1^{(4)}-y^{(4)}\right)\cdot x_0^{(1)} \bigg]= 0,
$$
since $^{0}\theta_0 = 0,$ $^{0}\theta_1 = 1$ and $x_0^{(i)} = 1.$
$$
\ ^{1}\theta_{1}:= \, ^{0}\theta_{1} - \frac 14 \bigg[\left(^{0}\theta_0+\,^{0}\theta_1x_1^{(1)}-y^{(1)}\right)\cdot x_1^{(1)}
+ \left(^{0}\theta_0+\,^{0}\theta_1x_1^{(2)}-2\right)\cdot x_1^{(1)}
+ \left(^{0}\theta_0+\,^{0}\theta_1x_1^{(3)}-y^{(3)}\right)\cdot x_1^{(1)}
+ \left(^{0}\theta_0+\,^{0}\theta_1x_1^{(4)}-y^{(4)}\right)\cdot x_1^{(1)} \bigg]= 1.
$$
Thus, $^{1}\theta_1 = 1$ and $^{1}\theta_0 = 0.$ Notice that if we want to proceed to the next iteration, we need both $\theta_0$ and $\theta_1$ which we found at the previous step. So:
$$^{2}\theta_1 = : \, ^{1}\theta_{1} - \frac 14 \bigg[\left(^{1}\theta_1x_1^{(1)}-y^{(1)}\right)\cdot x_1^{(1)}
+ \left(^{1}\theta_0+\,^{1}\theta_1x_1^{(2)}-2\right)\cdot x_1^{(1)}
+ \left(^{1}\theta_0+\,^{1}\theta_1x_1^{(3)}-y^{(3)}\right)\cdot x_1^{(1)}
+ \left(^{1}\theta_0+\,^{1}\theta_1x_1^{(4)}-y^{(4)}\right)\cdot x_1^{(1)} \bigg]= 1$$
So, regardless how many updates we apply, the value of $\theta_1$ will be constantly equal to $1,$ since at every iteration we have $\theta_0 = 0$ and $\theta_1 = 1.$
About update 2: Here is What I would do if I were in your shoes. First of all, I would calculate separately $h_\theta(x^{(1)})$ and $h_\theta(x^{(2)}),$ where $\theta $ is our initial vector $\theta=[ 1 \quad 3 \quad 2 \quad 1]^T.$
We have:
$$h_\theta(x^{(1)})= 1\cdot 1 + 3\cdot 1 +2\cdot 2 + 1\cdot 1 = 9 $$
$$h_\theta(x^{(2)})= 1\cdot 1 + 3\cdot 4 + 2\cdot 2 + 1\cdot 5 = 22. $$
Thus, if we implement the algorithm, we get:
$$\begin{array}[t]{l}
\theta_0 = 1-\frac{0.5}{2}\cdot \left[(9-1)\cdot 1 +(22-2)\cdot 1 \right]=-6\\
\theta_1 = 3 - \frac{0.5}{2}\cdot\left[(9-1)\cdot 1 + (22-2)\cdot 4\right]=-19\\
\theta_3 = 2 -\frac{0.5}{2}\cdot \left[(9-1)\cdot 2+(22-2)\cdot 2\right]=-12\\
\theta_4 = 1-\frac{0.5}{2}\cdot \left[(9-1)\cdot 1+(22-2)\cdot 5\right]=-26
\end{array}
$$
Thus, after one update the new $\theta=[-6 \quad -19 \quad -12 \quad -26]^T.$
If you want to apply the algorithm once again, evaluate the new $h_\theta(x^{(1)})$ and $h_\theta(x^{(2)})$ and proceed as before.
Notice that the prof uses the convention:
$$\begin{array}[t]{c | c | c}
x_0 & x_1 & x_2 & x_3\\
\hline
x_0^{(1)} = 1 & x_1^{(1)} = 1 &x_2^{(1)} = 2 & x_3^{(1)} = 1\\
x_0^{(2)} = 1 & x_1^{(2)}=4 & x_2^{(2)} = 2 & x_3^{(2)} =5
\end{array}
$$
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