The person drawing on the map can only draw what you tell him to. With Map Updates on he magically draws every ship in sight, including the ones hidden behind other ships; he magically draws them all at once without any delay, and he magically knows the exact distance to each ship without ever seeing them.
With Map Updates off he refuses to draw anything, including sonar lines.
Try the Assisted Plotting Mod. It removes all contacts from the map, but if you lock onto a target and identify it (or have the Weapons Officer do it for you) it will then appear on the Attack Map. On the Nav Map there is nothing, but if you move the cursor around you will see dashed circles, and if you click on one it will say "Unknown". If it is IDed on the Attack Map it will then show up on the Nav Map when you click on the circle.
The above picture was made with GWX, so there are maybe twenty ships in the harbor. The only one showing is the one I IDed.
So far it's the most realistic compromise. It also cancels the renown loss for having Map Updates on.
[Edit] My FileFront site is gone, and so is BtS Mods. I'll have it up for download here in a day or two.