Is there a way to allow editing in the source files original location & have the portfolio stay linked & update from this, rather than portfolio automatically copying the source file to a temporary location?
No, and I doubt there ever will be. A PDF Portfolio is just a set of attachments, so think of it like a ZIP file - the documents you add to it become embedded copies rather than links, and to include information in the Portfolio about where the original files came from would be a huge privacy issue. Would you want a customer finding out their quotation came from a folder called "quotes/annoying clients/2012" ??