I'm posting to keep this conversation going, with hopes of Apple picking up on this issue.
I have a clean, AT&T locked iPhone 5, running whatever the last iOS 7 was, and I'm having this exact same issue. I am up to 10 apps that need to be updated, the "Update All" button is grayed out and when I try to update the apps individually, I only succeed in opening the app instead.
FYI - for all those posting work-arounds for this issue, while your help IS appreciated, it is nevertheless besides the point. We shell out extra dough for Apple products and, personally, I expect them to work! If I wanted to bothered with a bunch of work-arounds, there are plenty of smartphones on the market that would save me a lot money. I want to hit the "Update All" button, put my iPhone down and finish what I was doing!