It won't work if you have the "Options for skipping LiveUpdate" enabled, as these are managed clients and likely to always see the SEPM (as illustrated by the log screenie).
Is this LiveUpdate setting meant to act as a backup in case updating via the SEPM fails, or should the clients always update via Symantec LiveUpdate?
If the latter, then I'd suggest you disable all "Options for Skipping LiveUpdate". What you've got at the moment means the client will only update via Symantec LiveUpdate at 01:30 if it's more than a day out of date and hasn't been able to heartbeat to the SEPM in over 8 hours.