That got me on the right track. It's a little non-intuitive that you can't use extension for package. Here's what I ended up with that works.
First, the package manfiest
<updateservers>
<server type="collection" priority="1" name="Connect Daily Update Site">http://www.connectdaily.com/joomla/updates/package.xml</server>
</updateservers>
Now, in package.xml
<extensionset name="Connect Daily" description="Connect Daily Events Calendar System">
<extension name="Connect Daily Package" element="pkg_connectdaily" type="package" version="0.9.2" detailsurl="http://www.connectdaily.com/joomla/updates/pkg.xml"/>
</extensionset>
finally, pkg.xml
<updates>
<update>
<name>Connect Daily</name>
<description>Connect Daily Events Calendar System</description>
<element>connectdaily</element>
<type>package</type>
<version>0.9.2</version>
<infourl title="Connect Daily">http://www.connectdaily.com/joomla/</infourl>
<downloads>
<downloadurl type="upgrade" format="zip">http://www.connectdaily.com/joomla/updates/pkg_connectdaily-0.9.2.zip</downloadurl>
</downloads>
<tags>
<tag>stable</tag>
</tags>
<maintainer>George Sexton</maintainer>
<maintainerurl>http://www.connectdaily.com/</maintainerurl>
<section>Updates</section>
<targetplatform name="joomla" version="3.[23456789]"/>
</update>
</updates>