>>"Any system variable controlling updating Nested Blocks"
No
>>"or am i missing something?"
Depending of what happens, by what way and what you expect instead.
>>"One host file does not update blocks in referenced file when blocks altered"
After reload - Impossible, becaue the a host file does NOT stores the xref content (just temporary).
What kind of edit will not update, what did you changed? I guess it works well if you add a circle to the black, save the file and you open the host file, it works or?
If you are talking about "styledefinitions" like linetype or textfonts, it is possible in rarely situations,
but without your cad data, we can't check your issue.
Open your external file and your host by RECOVER, run Audit YES; Save, Close
open the main file again. Still an issue?