A VHD (Virtual Hard Disk) can have a size up to 2TB.
Windows Embedded Standard 7 support native booting from VHD files which nearly no performance loss.
This brings many advantages such as easier deploment - only copying the bootmanager and the VHD is necessary.
Updating the image is as simple as replacing a file - just replace the VHD file on the disk.
Versioning - copy another image version onto the disk and select the version you need from the bootmanager.
Updating images can be automated using VHD files. A simple program can download the VHD from your server and put it to the HDD.
The next step needed to be done is to add the VHD to the bootmenu and set it a default. Done.
If something is wrong with the new image there is still a possibility to revert back to the old one.
If everything is ok the old one can be removed.
A free tool for this can be found here.
Windows Embedded Standard 7 enables you to install the image directly to a VHD file by using IBW.
All you need to do is to create the VHD and mount it manually before running the setup.
Then IBW will take care of registering the image in the bootloader.
A howto can be found here.