Implementing an update/upgrade system for embedded Linux devices
I believe you are looking wrong at the problem - any update which is non atomic (e.g. dd a file system image, replace files in a directory) is broken by design - if the power goes off in the middle of an update the system is a brick and for embedded system, power can go off in the middle of an upgrade.
I have written a white paper on how to correctly do upgrade/update on embedded Linux systems [1]. It was presented at OLS. You can find the paper here: https://www.kernel.org/doc/ols/2005/ols2005v1-pages-21-36.pdf
[1] Ben-Yossef, Gilad. "Building Murphy-compatible embedded Linux systems." Linux Symposium. 2005.
I absolutely agree that an update must be atomic - I have started recently a Open Source project with the goal to provide a safe and flexible way for software management, with both local and remote update. I know my answer comes very late, but it could maybe help you on next projects.
You can find sources for "swupdate" (the name of the project) at github.com/sbabic/swupdate.
Stefano
Currently, there are quite a few Open Source embedded Linux update tools growing, with different focus each.
Another one that is worth being mentioned is RAUC, which focuses on handling safe and atomic installations of signed update bundles on your target while being really flexible in the way you adapt it to your application and environment. The sources are on GitHub: https://github.com/rauc/rauc
In general, a good overview and comparison of current update solutions you might find on the Yocto Project Wiki page about system updates: