There are some myths related to updating public apps on the Microsoft Store that I would like to dispel. I will demonstrate that public apps like RetroArch uploaded to the Microsoft Store can be updated, even if they are categorized as games.
For the purposes of this demonstration, an update to an existing public FTP app on the Microsoft Store will be shown. Note the app ID that is displayed for this existing app: 9P363P05BZLV. Also, note that it is categorized as a game.
Here's a screenshot of the app itself running on an Xbox.
Here's a screenshot of what the store page looks like.
To demonstrate that this app can be updated without creating a new product in Partner Center, I will change the name of the app ("Durango FTP") that is displayed when the app is running, and I will also change the app's description on the Microsoft Store.
The process of doing this is identical to updating a private app on the Microsoft Store, so I will not detail it extensively. Public apps don't go through complete certification when they are updated, so they can still be updated in this manner without explaining the use of restricted capabilities. After pushing an update to the app, here's a screenshot of the updated app running on an Xbox, with the title changed to "Egress FTP."
Here's a screenshot of what the store page looks like now, with the modified description. Note that the app ID displayed in the URL is identical to what was displayed in the first screenshot.
I hope this puts to rest the idea that public apps categorized as games cannot be updated. I've successfully pushed updates for RetroArch and PPSSPP as well, which have always passed certification for me.