Firstly, that's the wrong URL.
http://server.example.com:8088/index-lion-snowleopard-leopard.merged-1.sucatalog
Secondly, if you get the URL wrong, software update will just error. It won't default back.
It sounds like you have bigger probalms... You should ensure that profile manager is properly pushing settings to clients.
Push the new setting to the client computer and wait for it to complete.
Once it completes, restart the client.
On that client machine in terminal type:
sudo defaults read /Library/Preferences/com.apple.SoftwareUpdate CatalogURL
type your password.
It should echo out the URL you've specified. If it doesn't, then there's something else going on preventing the setting from being pushed out.
-Graham