In a class library
Ado.net Entity Data Model
Update Model from Database
Not a fix but a workaround: Is it not an option to simply remove and regenerate the EDMX and the generated classes? That's what I do, it is much easier than working with the update feature, and the result seems to be the same. Your POCO extensions still remain the same and functional.
I use database first and I have my SQL upgrade scripts, the generated EDMX and my Generated models in source control and the changes there are very easy to manage. Here is a rough outline of my DB upgrade process for each version: