Can Drush update custom modules?
As you said, Drush relies on the update status module of Drupal to find code updates.  If you wanted to use this mechanism for your own custom modules, you would have to make a server that had clones of the d.o modules you used, since pm-updatecode works with a single update server, and also has the same xml data structure for the releases of your custom modules.

There are two easier solutions:


Publish your custom modules on drupal.org - very easy, and a great option if your modules can be shared openly.
Just check out your custom modules from git; after running pm-updatecode, iterate over each custom module and do a 'git pull'.


The later could be integrated with drush pm-updatecode, either as a post-updatecode hook or as a feature request submitted in the Drush issue queue (patches welcome).