My hunch is that it's even simpler than that (on the SL2):
Allocation is linear (*), as long as you don't "shutdown" the unit. e.g. F gets allocated past E, instead of trying to fit within C. Bug: The SL2 code does not check for "out of memory" conditions, so when it gets beyond available memory, the code corrupts memory. Most SL2 users that record songs and programs have experienced this.
When you shutdown the unit, on the next boot it does some cleanup. I guess that it gets rid of framgmentation (or ignores small fragments). Once in a while, when doing the cleanup, it notices that fragmentation has reached a certain threshold that would require long enough processing and it displays "Updating Library".
I can't say that this is really it, but it would explain the observed behavior of the SL2 (and the problems that people complain about). People that record many long programs and don't regularly shutdown their unit get memory corruption (e.g. problems playing back programs) within 2 to 3 weeks. I do record long programs, and yet, I have been able to avoid getting corruption for long periods of time by shutting down the unit daily. Unfortunately, I often modify the programming and sometimes I screw up by modifying a program while it is being recorded. The weak memory management of the SL2 leads to memory corruption in such case (instead of disallowing the modification or handling the concurrent modification correctly).
(*) When you think about it, the SL2 never knows in advance how much space it will need for recording (the stream has variable bit rate), so it has to allocate linerarly, unless you put in place a relatively complex memory management scheme, which would be way too costly in terms of performance (and heat). So, I'm pretty sure the SL2 programmers took the easy approach. Actually, there are so many dumb bugs (no checking of "out of memory", and many other conditions) that I don't think they could even imagine the more complex memory management scheme.
Of course, if memory was managed as a file system, it wouldn't suffer from fragmentation, but I don't think SL2 programmers wanted to design a file system, nor that their bosses wanted to pay for a file system license.