I have a linked .ai image placed on a master page, and I have the automatic update option turned on.
When I change the image in Illustrator and save it, I get the notification that the linked image has been updated and I see the changes on the master, but the page to which the master is applied does not update -- somehow it keeps the old version of the image, even though the old version of the image file no longer exists on disk. This makes me think the image is linked on the master page, but it's embedded everywhere else, or something like that? Very strange.
Anyway, I have to re-apply the master to the page in order to see the updated image. I would expect that master updates always automatically go onto the page, especially for linked images.