Oracle update statement using with clause takes for ever
Am I abusing the with statement?


No, you are abusing the UPDATE statement. With an UPDATE statement, the correlated subquery is executed for each row from final_table.

Updating values from an other table should be typically done with MERGE.

Example:

merge into final_table using
(
select c4,c5,c6
from
(
  with temp_table1(c1,c2,c3) as
  select c7,c7,c9 from source_table,

  temp_table2(c4,c5,c6) as
  select "some aggregation on c1,c2",c3 from temp_table

  select * from temp_table2
)
) inner
on inner.c6 = final_table.primary_key
when matched then update set final_table.destination_col1 = inner.c4, 
                             final_table.destination_col2 = inner.c5;