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Firstly, I have to be picky, there is no "reading update" plugin. You are talking about the Kobo Utilities plugin and it's ability to store and restore the reading status of books on the Kobo devices.
The answer is that you missed a step. The reading status is not restored to the device when you send the book back. This cannot be done until the book is processed into the database on the device. So, you need to send the book, eject the device and wait for the processing to finish. Then you connect again and restore the reading status.
Restoring the reading status is then done using the "Store/restore current bookmarks" function. Connect the device, select the books you want to restore the status for, select the above option and choose the "restore" radio button and the other options as required. Then press OK. When finished, a message will be displayed with the counts of what happened and when you disconnect the device, the reading status will have been updated.
This is explained in the help. If you have read this and didn't understand it, please tell me so I can fix it.
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