I actually see this as the area that drove the growth of WP through the second quarter of this year and it is the area that offers the most untapped potential for WP. When the 5XX can sing on half the RAM of an Android, I feel this can be the continued growth market. What is it the lower cost market wants? A great smartphone that will standup to long term use and hold up to daily use. I am not "anti-Android", but the truth is the truth: If you do not spend a good amount of time maintaining your Android, it bogs down especially on low end hardware. WP is designed to run on that Hardware. I believe a couple years from now Lumia 520's will still be in use, while all the ZTE, Samsung, LG, Huawei, and dozens of other Android devices that outsold them will be dumped.
Besides- how many of those low end Androids will get Android L? Like less the 5%? Every Lumia 52X will get 8.1. Users will remember that.
It is the mid-range and top end device range that WP has made almost no inroads. The L1020 can be called a success, but if you are being honest there isn't any other device which has accomplished what a WP needs it to.
512 MB RAM does not ensure a very seamless and smooth experience on any operating system, except maybe iOS. But having used two devices in the past with 512 MB RAM, the Lumia 520 and an antiquated HTC Explorer running Android 4.4, I realized something pretty interesting.
When Google said that Android 4.4 was optimized for 512 MB RAM, they weren't kidding. My HTC Explorer multitasked faster than my dual core Lumia 520, which often greeted me with a "resuming" message.
It's a myth that Android isn't optimized for low end hardware, it is. But if OEMs like Motorola can fit 1GB of RAM into their lowest end devices, what's the harm?
If 512 MB of RAM was enough why did Nokia make a Lumia 525? Because there are a lot of games that are either poorly optimized for 512 MB RAM or not optimized at all!
The state of updates on both Android and Windows Phone are pretty identical. For the Android side all OEMs have given up updates in the low end side except for Motorola, and in the Windows Phone side all OEMs have given up any future updates except for Nokia.
Now if you were to ask me what budget device to buy, or someone else asked me, I would have for sure recommended 520(or 620) an year back because Windows Phone we're the best bang for the buck devices, but they've been beaten with phones that have better internals, more RAM and a higher resolution screen(Moto E and G)
Plus Google is also taking initiative with it's Android One Program. And since you are so concerned about Android updates, I would also recommend reading this:
http://m.androidcentral.com/android-fragmentation-seemingly-impossible-conversation
The future for Microsoft looks even more bleak than it was ever before.
Again I'm not trying to be anti-Windows Phone, but I am trying to convey what I think is the truth.
It depends if Lenovo finishes acquiring Motorola by early next year (which they almost certainly will). Google is able to subsidize Motorola's losses because of the search business, while Lenovo only makes money from hardware. Their phone business is already a moderate success, so I really can't see them taking the reported $1 billion per quarter losses that Motorola brings in. While the Moto series have been well received, Lenovo's track record of buying a company with high quality hardware, then reducing the quality coupled with the fact that they're not going to subsidize these phones to take a loss pretty much means that the days of the Moto series dominating are going to be coming to a close soon.
If Lenovo's smart they are going to continue providing the same level of quality hardware and software updates. So don't worry too much about this.