How should i publish a version 2.0 of my already published and featured model? As a whole new model or updating the already existing one? I’m afraid that I might lose the featured model tag if I change it too much.
A second version is a remix. Featured Models can’t be remixes.
You can’t remix your own creation - V2 of your original design is still your original design.
AFAIK updating the model isn’t going to affect the “featured” status. Hell, it’s even a requirement in exclusive model program 
So you don’t have to worry about that
That depends on what are the changes - if it’s some part changes to improve the model, then adding a new updated profile and privating the old one is the way to go IMHO. If it’s complete redesign then v2 and new model with fresh start and no featured tag. Up to you to decide.
I faced a similar issue in the past and decided to create a new V2 model while marking the old one as deprecated (but still active). However, in my case, the model was entirely redesigned from scratch.