Note that currently LUP doesn’t allow you to create machine groups or change membership. However, the groups created in the standard WSUS console are usable from LUP. Be aware that machines can belong to more than 1 group, so it isn’t necessary to remove them from any existing groups to add them to a test group.
Contra-wise, local updates can’t be viewed or approved from the standard WSUS console, and must be managed thru LUP.
The WSUS clients use a locally stored cookie to target the groups they are assigned to. Until this cookie expires your clients will not recognize new group assignments. You can either wait for the cookie to expire or force it by running 'wuauclt /resetauthorization /detectnow'.
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