> wouldn't it be possible for Windows to partition off part of the disk
This is what ChromeOS and Android do. At least on Android Pixel phones, there's A and B partitions for each of the boot, system, and vendor partitions. The bootloader tracks whether A or B should be booted. Userspace downloads the updates and writes to the opposite-than-booted partition. On reboot, the bootloader boots the latest partition. Downsize is these partitions are now double the size, so less space for the user partition.
This is what ChromeOS and Android do. At least on Android Pixel phones, there's A and B partitions for each of the boot, system, and vendor partitions. The bootloader tracks whether A or B should be booted. Userspace downloads the updates and writes to the opposite-than-booted partition. On reboot, the bootloader boots the latest partition. Downsize is these partitions are now double the size, so less space for the user partition.