So after using Populated Cities Towns Villages, I noticed every once in a while, an NPC would spawn without clothes. After hours of detective work, I found out that my bashed patch was adding an item to the farm clothes leveled list that Update.esm had removed, because that particular outfit uses up head and necklace slots, hence NPCs not equipping it.

Literally, the list in the patch shows Skyrim.esm and Update.esm, a removed item from the list, replaced by the bashed patch.

Here's my question: how do you keep the bashed patch from combining Skyrim.esm and Update.esm?

Actually, it's probably not that big of a deal. This seems to be the only problematic entry.

You don't, you post your findings in Wrye Bash Thread here where the Wrye Bash Devs can confirm or refute your theory.
If confirmed they can fix it in next release.
The correct workaround until that release is to edit the specific issue in the Bashed Patch using TES5Edit, unless the Wrye Bash Devs say otherwise.