I presume the client update was to steer ppl back onto same chain (using checkpoints) or something other that forked the chain.
Youre client receives message from bad node saying it has more blocks that you, but because of the checkpoints your client wont download those blocks.
Thats why you are out of sync (or actually youre wallet only thinks it is because someone says he has more blocks than you have in youre chain).
Out of sync condition removes after shorter chain passes the longer one.
It doesnt affect mining at all (if you are on the right chain).
Thanks. You're right - there was a new client released which I installed.
A secondary question: If the client has been restarted and is legitimately catching up blocks can it still add a new block to the chain?