Is possible to update a project that has been installed from the archive file?
I got this working, I was very close but removing /vendor and composer.lock was what helped in the end.
Here are the steps from the top:


add the line
        "drupal/core": "~8.1"
to the 'require' statement (or update it to whatever version you require - in my case ^8.0 - latest Drupal 8 release).
Remove the drupal/core line from the 'replace' statement.
Add the following line somewhere (at the end? I believe this should replace the existing repositories statement, more information here.
):

"repositories": { 
    "drupal": {
        "type": "composer",
        "url": "https://packages.drupal.org/8" 
    }
}

Remove the /vendor folder
Remove the composer.lock file
Run your core update as follows

composer update drupal/core --with-dependencies