The way I think the category layout updates work is that it only updates the layout for the selected category, not the children or products.
You will probably need to create another custom template under your template structure and set the category to use that template and apply it to all products in the category and subcategories. In your custom template, just have the catalog.xml layout with your updated layout. Then you select the new template for the desired category in the admin. This will then apply your new layout to just that category and all children (if you set the dropdown accordingly).
So you will have the following template structure:
catalog.xml (or whatever layout file contains your custom layout)
You can also do this with the skin directory if you need to use special styles, images etc. but the design bit should be enough just for the custom layout.
Hope this helps.