"There are two paths between A and B. And that justifies the use of update-source in the neighbor command"
Not sure exactly what you mean by this. You need the update source command when you don't want your router to peer on it's directly connected interface so
(loopback 10) A (192.168.1.1) -> (192.168.1.2) B (loopback 10)
As giuseppe says it can be any combination ie. A uses loopback, B uses physical interface, both use physicals, both use loopbacks etc. It's up to you. Only if the interface is not directly connected do you need the "update source ..." command.
If both routers are configured to peer to the other router loopback address and that you configure the "neighbor update-source lo0" only on one side, the session will come up but only when the side configured with the update-source actively establishes the session. This is because only this side will try to establish the session using the proper source address. When the other side try to actively open the session using the physical interface address as its source, it fails as the source will not match the peering address configured on the other router.
Harold Ritter Sr. Technical Leader CCIE 4168 (R&S, SP) email@example.com México móvil: +52 1 55 8312 4915 Cisco México Paseo de la Reforma 222 Piso 19 Cuauhtémoc, Juárez Ciudad de México, 06600 México
In the excerpt you posted, I believe what they are mentioning "if you are using multiple paths to IBGP neighbors" is because the loopback is obv a logical interface so in the event a physical to physical or phys to Logical (Loopback0)there is a possibility the phys int can experience HW issues.
Thus breaking the IBGP peering session.
As HRitter mentioned is only one side is configured with Update source loopback# that side will establish peering session, so obv both ends (if both peering endpoints are configured as loopback meaning the interface announcing the prefix
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