1.) Set your update keyword to "Re:" in Actions
2.) The ticket that is replied to must have the ticket ID in the subject line of the e-mail in order to update the ticket. So keep in mind each e-mail update must have two elements in the subject line. The word "Re:" and the ticket #.
3.) You must set up an automatic action in your process that replies to each created ticket, with the ticket # in the subject line. Mail Manager does not do this for you, despite interpreting the ticket # in the subject (don't ask me why.. I don't get it either).
Now you're going to have two automatic messages sent during a successful creation. Set your mail to only 'update' once you've done all your testing.
I hope this helps.