Hi
"If a machine is updating from the internet should that plist file be empty?"
Yes.
If the client machine is not bound to OD but SUS is running on the Mac Server then the command outlined on Pages 88-89 in the Admin Manual:
http://manuals.info.apple.com/en_US/SystemImage_v10.6.pdf
issued on the client machine will cause the client machine to 'get' its updates from the Mac Server and not the Internet. The Manual is for 10.6 but will work for 10.7. If you apply the command the plist should then contain the URL of the Mac Server.
If the client machine is bound to AD & OD then you can apply a User, Group or Hardware MCX (your choice) for Software Update which points to your Mac Server. You don't need to be bound to AD for this to work. As long as the client machine is bound to OD and DNS is working as it should be, this will work. Again you won't see anything in the plist stored in /Library/Preferences. MCX plists are stored in /Library/Managed Preferences.
HTH?
Tony