Yeah, unfortunately you have to go in and manually export as BibTeX after every change to your reference library. It's not very annoying if you are writing one paper but I can see how that would be annoying if you're writing many at once. I suppose one could point LaTeX towards one master library in one location which you export to...
Probably my biggest "eureka" moment was when I realized that I don't publish enough papers a year for bibtex file management to really be something that I needed to optimize... unfortunately I realized that long after I'd optimized the hell out of my bibtex file management.
Haha, I actually started using Papers because it was the only software that was a reference manager that synched highlights and notes in papers with my iPad. The BibTeX integration was a pleasant surprise!
If you update a paper's citation details (say someone's working paper gets published, so you have to add a journal, etc.) how do you make that change across directories? Do you re-export from papers for each one?