I think the update launching location was a red herring.
It appears that the update will work if I kick off another update via the [Dom0] Qube Manager before my TemplateVM automatically shuts down. The update seems to fail when the [Dom0] Qube Manager automatically starts the TemplateVM. It seems like a timing issue. If I start the TemplateVM that needs to be updated BEFORE updating it through [Dom0] Qube Manager it works.
Is it possible to configure a longer delay for updates OR to get some indication as to what in the update process uses JSON files?