It doesn't necessarily actually do a distinct.
I personally would not recommend changing the update to use the update from syntax. Since we know that the join will produce duplicate rows, it's not guaranteed what value the update will pick. An update from should never be used when there are duplicate rows produced by the join, as there will be in this situation.
Gail Shaw
Microsoft Certified Master: SQL Server, MVP, M.Sc (Comp Sci)
SQL In The Wild: Discussions on DB performance with occasional diversions into recoverability