This issue has been addressed with the SMG 10.6.6 release. The update command in SMG 10.6.6 will correctly update using the localinstall option.
For SMG 10.6.4 and 10.6.5 systems, updates will need to be performed using the standard method of internet download either directly or via a proxy server. If no connection to the internet can be made, either directly or via proxy, the system will need to be installed via osrestore. For the control center, any site specific policies or configuration will need to be re-entered following the fresh installation via osrestore.
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