What version of legato are you using? If you are using legato > 16.10 which is AVC2 (https://docs.legato.io/latest/avMigration.html), the LWM2M_LEGATO_SYSTEM_UDPATE feature is no longer supported (OTA update using the *.update).
However you can still update your system through FOTA (Bundling mechanism). Instead of using the *.update file, you’ll be using the legatoz.cwe file in your build directory.
Here is an example of a FOTA package used to update a legato system (assuming the version is 18.04.0_612aee16f4e1ar736d…).
<?xml version="1.0" encoding="UTF-8"?>
<app:application xmlns:app="http://www.sierrawireless.com/airvantage/application/1.0" name="nick_bundle" revision="LE=18.04.0_612aee16f4e1ar736d2" type="WP7603-1">
<binary file="legatoz.cwe" type="FULL"/>
Note: The type field must match your “Firmware” linked to your device. You can check what is it by going to Inventory->Systems->(Your device) and under “Firmware” click on the highighted package.
To perform a bundle update on the server, go to Monitor->Systems->(Your device) and under More->Install Bundle.