It is true that moving the Applications folder will cause some trouble, but you can always leave a symbolic link behind so that the system knows to go to the new location. Here's how to do this. Note that a symoblic link is VERY, VERY different from a Mac alias, and a Mac alias usually doesn't work in situations like these.
1: Copy your Applications folder to its new location.
2: Open up the Terminal. Now type "ln -s ", without the quotes, but with the trailing space.
3: Go back to the Finder, and find the place where you put the new Applications folder. This is where you are going to install new applications. Drag that folder to the Terminal window you made. The UNIX path to your new applications folder should have been inputed into the Terminal.
4: Type " /Applications" without the quotes, but with the first space.
Your Terminal should have something like this ready to execute:
ln -s /Volumes/HAL9000/Applications /Applications. If your command looks like this, you can proceed to the next step.
5. Just press return, and let your command execute. You should now have a UNIX symbolic link named "Applications" at the root level of your OS X partition. If you double click it, it should take you to your new Applications folder. Software Update and most other processes will most likely follow this symbolic link to the new place.
6. If you want to make it invisible, just grab ResEdit or something to make it invisible. Note that if you put a "." in front of the name it will make the alias invisible, but then because the name is different, Software Update and other such utilities will probably not be able to find the Applications folder so in this case ResEdit is the recommended way to make it invisible.