I would like to know how SF developers are updating SF applications at the customer site?

I have not done any yet, since I am still working on my first real SF project, but based on my experience with VFP application I would do the following for an application to be run in a local network by 3 or more workstations:

Initial Installation:

• Install SF application in the server
• Install MS-SQL-EXPRESS
• Deploy Application Database (including Security Database if separate)
• Create a Shared setting connection for all workstations

Updates:

• Using any online method like the one provided by InstallAware setups, download any available update.
• If there is an update for the database
• Make sure everybody is lock out the database (don't know how to do this yet :hehe
• Run the DDT package update and update the database (there should be a way to know if the update was sucesfull or not, maybe a database version number or something else)
• Let the update Installation to remove previous installation at the workstation and then re-install it again as per Windows Installer rules.

Please keep in mind that I have not done anything of the above yet, so feel free to post any relevant information/experience with this or any other approach.

Thanks!

This is the entire purpose of the DDT.

Yeah, you can do that...it ends up being more work, but it is definitely doable.