I have been working with SLES since SP1 and I have not seen this issue before:

# zypper --plus-repo dir:///data/appliance/updater/work/update.repo update --no-recommends sles-release
Adding repository 'dir:///data/appliance/updater/work/update.repo' [done]
Repository 'dir:///data/appliance/updater/work/update.repo' successfully added
Enabled: Yes
Autorefresh: Yes
GPG check: Yes
URI: dir:///data/appliance/updater/work/update.repo

Retrieving repository 'dir:///data/appliance/updater/work/update.repo' metadata [done]
Building repository 'dir:///data/appliance/updater/work/update.repo' cache [done]
Loading repository data...
Reading installed packages...
Resolving package dependencies...

Problem: product:SUSE_SLES-11.3-1.138.x86_64 requires sles-release = 11.3-1.138, but this requirement cannot be provided
  deleted providers: sles-release-11.3-1.138.x86_64
 Solution 1: deinstallation of product:SUSE_SLES-11.3-1.138.x86_64
 Solution 2: do not install sles-release-11.3-1.201.x86_64
 Solution 3: break product:SUSE_SLES-11.3-1.138.x86_64 by ignoring some of its dependencies

Choose from above solutions by number or cancel [1/2/3/c] (c):
I'm not even sure what a product means to zypper. I guess I need to update my product first. How do I do that?