Proof that UPDLOCK is not enough (you also need HOLDLOCK)

-- try running this script in two SSMS windows
USE tempdb
IF OBJECT_ID('T') IS NULL CREATE TABLE T (X CHAR(3) PRIMARY KEY)
GO
SET XACT_ABORT ON
SET NOCOUNT ON
DECLARE @x CHAR(3)

start:
SET @x=LEFT(CONVERT(CHAR(36),NEWID()),3)

INSERT INTO T SELECT @x
WHERE NOT EXISTS (SELECT * FROM T WITH (UPDLOCK) WHERE X=@x)
-- in the above statement we also need a HOLDLOCK hint, else we will eventually get a violation of the PK

--IF @@ROWCOUNT=0 DELETE T WHERE x>'A'
IF @@ROWCOUNT=0 BEGIN
    BEGIN TRAN
    IF EXISTS (SELECT * FROM T WITH (TABLOCKX,HOLDLOCK) WHERE X>'A') BEGIN
        -- we need to check if there are matching rows before deleting, else we will get a deadlock
        DELETE T WHERE X>'A'
    END
    COMMIT
END

GOTO start