Final answer:
The incorrect rule for MS Project when updating schedules is 'Move unstarted work to the status date'; MS Project keeps unstarted work on its originally scheduled date unless altered by the user.
Step-by-step explanation:
The rule that is NOT used by MS Project when updating the project schedule based on actual start, finish, or duration values that have been entered is c) Move unstarted work to the status date. Instead, Microsoft Project tends to keep unstarted work at its originally scheduled start date unless specifically instructed to do otherwise by the user. The remaining rules such as a) Move unfinished work to the status date, b) Keep completed work where it is, and d) Distribute remaining work evenly across the remaining duration, are typical behaviors exhibited by the software when actuals are reported. This ensures that the work that was planned to be completed by the status date is reflected accurately in the project schedule.