Yes, application linking can be considered or used as an update method. AppLink was not originally designed with this in mind, but since ThinApp runtime handles conflicting AppLink elements the way it does, it can be used to deploy updates to packages. AppLink as an update method is more or less only suitable for configuration changes. Since the update will be in a separate, somewhat loosely connected file, it's not recommended for use in applying security patches. If you don't have access to the AppLink, you will risk running an unpatched version. You can work around this by using RequiredAppLinks, but then you run the risk of over engineering the whole implementation. Let's repeat the AppLink conflict handling.
The last loaded conflicting element (file or registry key) will win. AppLink packages (child packages) are loaded after the parent package. Isolation modes use a different conflict handling; the most restrictive will win. So when using AppLink for updating...