That is correct, if Include External Files is selected, these files will be published with the workbook and will not be updated.
When you include external files, a copy of any referenced external file data sources or background images are published along with the workbook. External files include Excel, Access, Text, Data Extract, and image files. If you don’t include these files, others may not be able to see the worksheets online.
If you are publishing a workbook that references data sources or images on a mapped drive, be sure to check Include External Files. If you do not want to publish the external files to the server, for example because you want to preserve a live connection to a file-based data source after publishing to Tableau Server, change the connection information so that the workbook references a full UNC path. For example rather than connecting to D:\datasource.xls, you would connect to \\filesrv\datasource.xls.
Hope this helps!
Thank You Tracy.