I've avoided the 1.7 update due to the overwhelmingly bad experiences reported. I hit cancel at the update screen each time. No big deal. However, now the update screen Intermittently pops up during game play. What's up with that? Anyone see this? I'd rather not log off PSN all the time to avoid auto updates.

I have not ran into this during gameplay, only on boot up for me.

It will happen if you are connected to PSN, you don't have to be logged in as the update servers operate regardless.

The only way to avoid the update and prompting is to be disconnected from the network while playing so turn off the wireless or pull out the ethernet cable if the router has to remain active for other devices on your network.