There are two feeds coming out of espn as directv and dish get them. If the receiver switches at the headend, that means both feeds are coming out. Nothing you said precludes them giving one feed game A and the other game B per assigned then switch as needed. Guide data can be updated on the fly for the switched cable channels. My local abc always has the game data by game time.
When cable companies get a receiver authorized for ESPN they require you to register which DMA and counties the headend serves, then it gets plugged into the multiple sats so the feed can be switched to channels that reside on other satellites like alternates and ESPNEWS. Since Dish and DirecTV are national they are not part of the pool where ESPN controls the receivers at the headend, they stay locked onto the main feed and bring in the alternate feed seperately. However since I'm not familiar with how DirecTV does things on their end, I don't know if they are hooked into the system where ESPN assigns the blackouts remotely and DirecTV then passes it on to whatever they use to determine if the game is blacked out for a zip code, or if DirecTV has to implement it manually.
In most cases the local station know which game they're getting in advanced, however markets that have no ties to either team or conference get to choose. It isn't until it's finalized that ESPN decides which game is on the main feed and which one will be on the alternate, that doesn't get sent out to the providers until Thursday afternoon.
Guide data cannot always be updated on the fly, DirecTV usually does a good job, for whatever reason they didn't this wekeend. Cable on the other hand is another story and it can vary from system to system, some can override the provided data to show the one game they're getting, others just show the national Game A or Game B listing you see on a site like Zap2it.
I don't know how "automatic" the switching is on able. Comcast in Denver has, on multiple occasions, had the wrong feed up during a regional blackout, either causing something to be blacked out in error or causing something to come through that we shouldn't have received. These events are uncommon, but they do happen. I have even seen ESPN SD have one game and ESPN HD have another game at the same time.
The Denver one is interesting, how long ago did the different game for HD and SD happen? ESPN switched to HD only distribution a few years ago where the one receiver outputs both HD and SD feeds to prevent things like that.