I installed RC1 on a rackmounted box, and entered: linux updates text at the syslinux boot prompt. I was never asked for an updates disk. Mice are a bit of a pain in the ass on rack mounted boxes. It would be nice if the text based installer could do updates.
This works in RC1 - please retry.
Did you test from a floppy with boot.img on it? The box I tried this on won't boot from it's cdrom, so I used boot.img and linux updates text at syslinux. I can't really try again (the boxes are in Richmond, and I'm in Raleigh for a while).