Question

How come this query fails to run?

select * 
from ass 
join (
    UPDATE [dsa]
    SET col1='123'
    OUTPUT inserted.*) as ds on ass.dsaid = ds.ID

Answer 1

You have to do it in two steps. Use your OUTPUT clause to go to a variable, then select from that variable:

DECLARE @tbl_out TABLE(ID int, col VARCHAR(10));

UPDATE [dsa] SET [col1] = '123'
OUTPUT inserted.* INTO @tbl_out

SELECT * FROM ass JOIN @tbl_out ds ON ass.dsaid = ds.ID

(not tested)