In general, you cannot use the sst_update option in a moving nest since you can not have SST pre-processed for the moving domain. If you have SST updated in fixed domains, it can only affect the nest domains in the leading edges of the moving domain where SST from the coarse domain will be interpolated. It cannot influence the center of the moving domain at the SST update time. Once the nest moves over to an area previously occupied by the coarse domain, the updated SST will have some impact. This is possible since V3.4.