The architecture of overlay networks should support high-performance and high-scalability at low costs. This becomes more crucial when communication, storage costs as well as service latencies grow with the exploding amounts of data exchanged and with the size and span of the overlay network. For that end, multicast methodologies can be used to deliver content from regional servers to end users, as well as for the timely and economical synchronization of content among the distributed servers. Another important architectural problem is the efficient allocation of objects to servers to minimize storage, delivery and update costs. In this work, we suggest a multicast based architecture and address the optimal allocation and replication of dynamic objects that are both consumed and updated. Our model network includes consumers which are served using multicast or unicast transmissions and media sources (that may be also consumers) which update the objects using multicast communication. General costs are associated with distribution (download) and update traffic as well as the storage of objects in the servers. Optimal object allocation algorithms for tree networks are presented with complexities of O(N) and O(N2) in case of multicast and unicast distribution respectively. To our knowledge, the model of multicast distribution combined with multicast updates has not been analytically dealt before, despite its popularity in the industry.