Benefits of updating apps If you update your app, does it get bumped to the top of the free apps section? Does it help improve visibility?
Only new downloads will count, redownloading or downloading an update does not. And the top is based on number of downloads per time-unit.

Updating your app, on the other hand will (probably) keep users satisfied with new features and layout. If they spread the word, or advertise in any way about your application you will get more downloads. But that's not what you initiately asked.