The entire notification popup is clickable already. It's a bit awkward since the cursor turns into a pointing hand cursor while traing to reach the "Update" button.
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Hmm, I don't think this would be an upgrade. Without a button there I don't think it's obvious that clicking on the pop-up will allow you to go perform updates. Sometimes it's best to be explicit.
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Perhaps. But there's also a tray icon that appears simultaneously which people are trained to click.