Magento – Checkout cart remove item not updating

This is default behaviour, just tested it on a CE1.7 with sample data. I do get an error message on top of the page that says: Some of the products are currently out of stock. You could change the text to explain what the user should do (remove that item from the cart) to continue or you can set all your products invertory to allow Qty below 0 so that the item is ordered as a backorder.

The issue at hand is that $this->getItems() returns only visible items ( see Mage_Checkout_Block_Cart_Abstract::getItems(). Visible items include the configurable parent but not the children.

In that case you will need to do something akin to:

foreach($this->getQuote()->getAllItems() as $_item){
   //...
}

This will return all of the items including both the parent configurable and the child. To filter just for the simple child you'd do something like:

foreach($this->getQuote()->getAllItems() as $_item){
   if($_item->getProduct()->getTypeId()=='simple' && $_item->getParentId()){
      //then it's a simple child!
   }
}

As an aside, in the future, you needn't call load again on Product ID as you already have the product with $_item->getProduct(). If product information isn't loading in a particular scope try adding it to the collection.