If the update isn't going to happen automatically, then every current node sees the current limit as exactly that, a limit.  Therefore, they will reject any and all blocks that are larger.

If the software is updated to allow a larger block, then everybody that doesn't immediately update to the new software (or who doesn't update by whatever deadline you might choose) will reject any and all blocks that are created by the new software.  The blockchain will "fork", and if the new software has enough acceptance the blockchain will remain split since the "old" miners won't be able to overcome the "new" miners blocks.  This sort of change (where old nodes refuse to accept transactions and/or blocks that are created by new nodes) is the definition of a hard fork.

Each time the software needs to be updated like this, there will be a significant number of individuals that each think that they have the best idea on how to handle it "this time".  Each of those individuals will get a group of others that agree with them and support them.  We will go through this disagreement and discussion again and again.