What ever you do under policy tab its for your clients.
use the Default Management Server
meaning that your clients will get the liveupdate from the SEPM Manager and not from LIveudpate Administrator.
If you want to point your SEPM manager to get the liveupdate from LIveupdate Administrator then you need to do that under ,
Admin
Servers
Right click on local site.
select liveupdate ( This liveudpate option is for your SEPM , above said if for your clients )