As far as I can tell, the paperdoll (for your own character) doesn't use an OnUpdate at all. Only OnEnter and OnLeave.
However, the Blizzard_InspectUI (for inspecting other people) does indeed use an OnUpdate to generate a new tooltip every frame.
Is there any way to fix it causing such a fps hit? It's actually worse on a high spec machine because more OnUpdates would be fired. I generally get knocked down from 90-100 fps to about 30-40 fps.