Dynamically Update PCB Outline Based on Component Placement?

All you need to do is to add a rectangle to your component in the library editor.  At the top of your editor window- Add /Board Geometry/Cutout.  Update your library part on your design and turn on the Board Geometry/Cutout layer to see it when you move your part around. Also, it would be good as well for you to add a -route keepout  rectangle around your cutout. This will light up etch DRC's if you try to add copper under your part. Otherwise you may forget that there is a cutout under your part especially if you have the cutout layer turned off.

Cheers

Me again. Sorry I did not notice the complex shape until I made your view larger to see what you were trying to do. But, for this complex shape you need to just click on the add "L" shape icon to draw the shape you like. Also while in the draw mode, you need to change the segment line type to arc to add the curves. .

I'd also consider the Shape Edit Mode to add the radius corners after you have drawn the shape, much quicker to do all in one go. 

Thanks a lot guys, thats what I did. Regarding fabrication, will board houses have an issue that the cutout (green) overlaps with the outline (yellow) as shown below? To me its obvious, but figured Id ask.

Not really, Because the supplier will would add a scrap section between your boards in their fabrication array to cut out your board. They would do this to allow their mill bit to hog out your cut out cleanly. By the way you could also add the mill route to your part as well. Add it to board Geometry/NC route path They will use this to reduce their setup time. Time is money. Plus, you'll be able see clearly yourself what you will get. If they did not add scrap the mill route would cut directly into the adjacent board. If you don't care about this. Then, just  add a fab note for the supplier telling them that this would be fine. Scrap costs money. So, if you penalize your design yourself, one of your goals should be to keep your cost down.

Cheers again