I wish I could provide more information. But that's it. lighttpd was definitely running because the the /admin/ webpage notice that the upgrade was available was hosted by that same lighttpd. I was taken a bit back that I had to login to an interactive shell to perform a CLI update. I could've sworn all previous updates happened via the /admin/ webpage (MY RECOLLECTION HERE IS INCORRECT. UPDATES HAVE ALWAYS BEEN VIA CLI. SEE BELOW). I could be mistaken about that. Unfortunately I have no proof of that nor anything to look into now as I repaved the device to make sure everything would be OK going forward. Sorry.
Did the "pi-hole -up" generate any error messages? I can't imagine I wouldn't have noticed that. I've been doing stuff like this for over 30 yrs. But again, no proof. I wish I'd captured the output but I didn't see any reason to.