Without knowing your update script or pre-checks, are you running a force_install_dir *installed location* prior to running the app_update command? Is the steamCMD the latest version? (pretty sure it prechecks when launched and updates automatically tbh).

Below are 2 of the update scripts I use for the respective RTM release and Beta releases of the server code. Both of these work without fail for me. Short of your logon permissions to the host restricting the update or the wrong force directory being used, I can't see why you can't get your server code updated?

RTM release (non beta)
login anonymous
force_install_dir "D:\Valheim"
app_update 896660 validate
quit

Beta release
force_install_dir "D:\Valheim"
login anonymous
app_update 896660 -validate -beta public-test -betapassword yesimadebackups