A new iOS6 configuration profile reference defines a new App Lock Payload. It allows to lock an iPad to a single application (kiosk mode).
Is it possible to update such an application on the fly using Mobile Device Management (MDM)?
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I would say no. App Lock is designed to limit access to the rest of the operating system. Allowing the user to accept a prompt to upgrade the app they are locked into might give them access (what if the upgrade failed? what if the app takes a long time to download?).