Hello,
The Difference between LUA and Internal Liveupdate Server is nothing. Both are the same.
"SEPM internal live update" is when SEPM is using a Internal Liveupdate Server (LUA) for updating itself.
You can configure the Internal LiveUpdate server to download updates from a Symantec LiveUpdate server and send updates to client comuters..As per SEP admin guide you should use the LiveUpdate Administrator utility to update the LiveUpdate server. The LiveUpdate Administrator utility pulls the definitions updates down from a Symantec LiveUpdate server.
The default liveupdate settings policy has the clients "use the default management server (recommended)."
This will cause the clients to get content updates as part of the normal check-in process.
Adding a liveupdate server is not a necessary step to get clients to update via the SEPM.
Installing and Configuring LiveUpdate Administrator (LUA)
http://www.symantec.com/docs/TECH102701
It is important to understand, When to use LiveUpdate Administrator
http://www.symantec.com/docs/TECH154896
LiveUpdate Administrator 2.x and Symantec Endpoint Protection Manager on the same computer
http://www.symantec.com/docs/TECH105076
Best Practices for LiveUpdate Administrator (LUA) 2.x
http://www.symantec.com/docs/TECH93409
Hope that helps!!