Make sure you have updated your MODX to version 2.51
Press [UTILITY] > “Settings” > “System”
Across the bottom of the screen you will see your current firmware version.

If not the latest, go to the Official MODX Download page
Download the latest firmware updater (includes instructions)
Download the latest manuals including the MODX 6/7/8 Supplementary Manual — it will include all the new features.

there is an audio sequencer option which needs an external USB storage. I'm yet to try this, but I wonder if this stores the tracks as individual wav files? Or does it mix everything down as a quick export of an idea?

It mixes everything down to a stereo .Wav file.

Does the recorded pattern change in real time with the scene buttons?

Each SCENE can be set to LOOP recording. A SCENE can be as short as 1 measure or as long as 256 measures. Each can represent a full composition or a portion (section) of a composition. Scenes can be placed in a specific playback order, called a “Chain”.

A Chain simply is a linear time line that instructs the sequencer to play a specific Scene and then when it reaches a specific measure change to another Scene. This facilitates recording your composition a segment at a time, then chain the segments into a linear structure (called “Convert to Song”... )

I cannot comment on the video, you don’t mention which video you are watching.

But “REC TYPE” is a box that appears after you have recorded your first track.
Because all three PERFORMANCE RECORDER “PLAY/REC” options: AUDIO, MIDI and PATTERN can be used in a variety of ways, what you do will depend on you. You can document yourself playing in real-time — capturing everything you do.

If you wish to add anything to an original MIDI recording (that includes the linear “MIDI” Song and the looping “Pattern” Scenes), you must set the REC TYPE = OVERDUB

Rec Type = OVERDUB allows new MIDI data to be added to existing MIDI data
Rec Type = REPLACE will wipe out previous MIDI recording with your latest effort

When working in the “Pattern” sequencer
If you are going to record to a Track in SCENE 3... if there is data on that Track in Scene 3, setting the “Rec Type” = Replace will wipe out the data on that specific Track in Scene 3
If you are adding new data to a Track in Scene 3... be sure to set “Rec Type” = Overdub allowing you to add new data to existing data of that Track in Scene 3.

Say you have already recorded Scene 3, Track 1 Drums; Track 2, Bass, if you are doing a brand new recording (to an empty) Track 3... you could use either Replace or Overdub because Track 3 is empty. If Track 3 has a Clavinet Part already occupying it... set Rec Type = Replace if you goal is replace just the Clavinet data. Set it to Overdub if you wish to add notes to the existing Clavinet data.

The REC TYPE option only appears when the RECORD button has been pressed but the PLAY button has not yet been pressed to begin recording. Very important to understand how it works...

You may notice, that there is no Track selection when recording... it is a Performance Recorder, the sound you *select* (be it one Part or multiple Parts) will be recorded. Whatever you play will be recorded... each of the 16 Parts has its own Track, if you can play the Part you can record the Part by playing it.

Extra Credit:
Please see this article, created when the Performance Recorder was expanded to include the Pattern Sequencer... it will give you a good overview of the features involving on-board recording of MIDI data (MIDI Song and Pattern) and Audio to a USB stick.
Mastering MONTAGE/MODX Pattern Sequencer

I cannot comment on the video, you don’t mention which video you are watching.

In fact the TO did mention it. "Performance Recording Using the Pattern Sequencer" is a link to "https://www.yamahasynth.com/learn/news/montage-modx-synthtips-1-2". It would be very helpful to setup the forum software to display links in a different colour so everyone could recognize this immediately.

@Bad Mister - thank you for your detailed answer as always. I have now updated the firmware to 2.51 as you suggested.
The link to the video I mentioned is this one - https://www.yamahasynth.com/learn/news/montage-modx-synthtips-1-2

In fact the TO did mention it. "Performance Recording Using the Pattern Sequencer" is a link to "https://www.yamahasynth.com/learn/news/montage-modx-synthtips-1-2". It would be very helpful to setup the forum software to display links in a different colour so everyone could recognize this immediately.

Yes - this. The poor choice to make links look even less like a link and exactly match regular text makes it difficult on both sides of the Yamaha divide. Yamaha messaging (that either forgets to manually add the formatting or was written long enough ago that it wasn't as needed) makes for a poor "hunt the wumpus" or "where's Waldo?" game trying to find a link. That is - if you're patient enough to mouse-over all the text to see if you "minesweep" the link out of content. And then on the other side, Yamaha - as evidenced by this exchange - is tripped up by the same poor choice in "CSS" (or whatever configures the link styles). I guess the burden is on the user to know that today one must add [ u] ... [ /u] around links to underline them (remove the spaces inside the brackets).

And here's an old message where I added site feedback requesting this get fixed:

https://yamahasynth.com/ask-a-question/font-changed-links-still-are-obscured-in-forum

(and yes, I added the underlining manually).

@Jason - this forum has tons of bugs and poor choices as I am learning. Over the weekend I was trying to access my account on my macbook. Somehow it would just not allow me to login. I would enter the email and password and it would just bring me back to the login screen again. Clearing cookies, allowing cookies, changing browsers (Chrome vs Safari) did not help at all. I tried almost all 4 days of the long weekend (happy thanksgiving!), and finally gave up. Now it's a work day and I tried with my work laptop which is Windows 10 with Mozilla firefox. I can sign in with this!