Thanks Domenico for the reply - I will try that. But basically, if you create a service using the ArcGIS Admin REST API, all updates have to be done via the API vs other methods (such as updating a service in ArcMap through the share dialogue)? IMO, either this is a bug (because the update process just failed without any error message), or ESRI needs to lay this out more clearly in the documentation.
Richard, I am still trying to figure out all the correct workflows...10.1 is completely different from past versions. I used the 10.1 Admin REST API method with JSON as described above because it was the easiest way to spin up my 10.0 services in 10.1 - but if I can't update them easily, then that method is not what I should have used. Now I'm thinking I may need to convert my JSON to .sddraft documents and then start the services from there.