What can be done with a workflow field update action?

Workflow field update can be performed on a

• A specific value, and enter the value in the space provided.
• Choose A blank value (null) if you want Salesforce to remove any existing value and leave the field blank
• Update the record type of a record
• Update the field value of a master record in master-detail. Cross-object reference.

So the answer to the above isA & B.

You cannot add update a child record. While updating a parent how would you determine which child record needs to be updated as a parent can have multiple child records.