Well, “update_wpmu_options” is certainly the wrong hook. It doesn’t send the blog_id as a parameter, so your code won’t ever work with that hook and use of the blog_id parameter.
If you just wanted to update the value on each site, then I would just put update_option('uploads_use_yearmonth_folders', 0);
on the init
hook, and wait for each site to be visited once.