what version and service pack are you using?
i'd double check that your workflow/experience so far is correct. i'm pretty sure that once a study is created, the material is "locked" to the material that was applied when the study was created. so only new studies would show the updated material. after that you need to apply material using SolidWorks Simulation.
that being said, this might be something i've been working under the assumption of because i have been working around a limitation or bug in a previous version.
Sorry for the delay, did not get any notification and new here!
I'm using SW2013 SP4.0.
As I said It looks like the override in Simulation break the dynamic link with the SW material. Annoying when You have the same part at multiple locations.
It took a while for me to find this one as I was always assigning material in Simulations. when I started to play with them in SW to update simulation, I doscover that. This is probably something SW is not aware of.
You need to work through your VAR so that this will be reported as a bug. Posting here does not get a bug into the system.
Having been invoked in the product dev process, you also have to think about the other side of the coin. Some people may not want it parametric. But submitting an enhancement suggestion should help get some happy medium implemented. Maybe a switch for the user to choose how they want it to behave. Or an option to updat if it sees the material has changed.