For the most part updates fix security holes that allow backdoor access whereas scareware boldly walks in through the front door.
Which of these computers is more likely to be infected?
1) A computer that is entirely uptodate but owned by someone who believes scareware adverts when they seem them.
2) A computer that is not uptodate but has decent virus and firewall software and an owner that doesn't fall for any of these scams.
Believing that automatic updates make you immune to malware is like believing regular use of registry cleaners and defraggers is essential to keep your computer running properly - all are complete nonsense. It's like believing raid disks protect you from fire, flood, theft and software failures - it just leads to a false sense of security.
Vigilence and education are the only solutions that we (rather than police and governments) can encourage - updates are just one (small) part of that.