Does TM make sandboxes obsolete?
 

I will continue to use SD to make bootable, updatable clones of my HD.

However, I used to use a sandbox configuration to ensure that I could easily reverse an update that screwed up my system.

Does Time Machine completely duplicate/replace the functionality & purpose of a sandbox?

Not really, because you can't really "just" restore the OS with Time Machine.

So, let's say I do an OS X update and find things are screwed up. If I use TM to revert to a state prior to the OS X update, I'll also lose any files I may have created since the OS X update? Is that what you mean?

Yes: it'll roll back the disk to the 'copy' you had on the date you picked... which rolls back your files.