First, the Codex is probably wrong in one spot, or the other. It mentions
'show_last_update' => 0, in the example but then says this in the Parameters:
(boolean) Should the last updated timestamp for posts be displayed (TRUE) or not (FALSE). Defaults to FALSE.
* 1 (true)
* 0 (false) - default
The difference is show_last_update vs. show_last_updated
In any case, it does not seem to work under WP 2.6+. This has been asked on the forum long ago. In this thread another user had the same question, and MichaelH confirmed it and submitted it to TRAC,
On TRAC it doesn't seem to say that this has been resolved (but I'm not real familiar with reading TRAC). I figured this little thing would be fixed by WP 2.7 since the bug was reported in WP 2.3.
In March one guy on TRAC didn't seem to understand what the last updated date would be. It should be, of course, the Date (post date or update date, aka timestamp) of the most recent post in that category. In other words the timestamp of the last thing added to that category.
So you would have:
Category 1 (42 posts) RSS-Link, Last Updated: 12-12-2008
Category 1 (15 posts) RSS-Link, Last Updated: 11-29-2008
It was mentioned again in March 2008 on the hackers list,
Is this still unresolved?
Thanks for any feedback / advice!