@People Ops
“Manager recipients and non-signing recipients can see all documents. By default, recipients assigned with a manager recipient action (specify, update, allow to edit), or a non-signing recipient action of Receives a Copy or Needs to View, see all the documents in an envelope. You can modify the document visibility settings for these recipients to selectively hide documents in an envelope for all but the allow to edit manager recipient. An allow to edit manager recipient can always see all documents in an envelope.”
This Docusign Support article contains more information to consider when using document visibility and lists the limitations, where the above quote was taken from.
Let me also add that document visibility is not meant to be used to update people that a document was signed. The “Update recipients” role is meant to be used to update recipients in the workflow if needed, e.g. to make corrections. If you want to inform people about the progress of an envelope this would be through the “receives a copy” role and as you stated, this role will always see all documents. Also the document visibility setting means that document visibility will not apply for users (internal signers) that are part of the the sender’s account.