Found this in: /webroot/osticketfolder/includes/class.ticket.php
function update($var,&$errors) {
global $cfg,$thisuser;
$fields=array();
$fields = array('type'=>'string', 'required'=>1, 'error'=>'Name required');
$fields = array('type'=>'email', 'required'=>1, 'error'=>'Email is required');
$fields = array('type'=>'text', 'required'=>1, 'error'=>'Reason for the update required');
$fields = array('type'=>'string', 'required'=>1, 'error'=>'Subject required');
$fields = array('type'=>'int', 'required'=>0, 'error'=>'Invalid Priority');
$fields = array('type'=>'phone', 'required'=>0, 'error'=>'Valid phone # required');
$fields = array('type'=>'date', 'required'=>0, 'error'=>'Invalid date - must be MM/DD/YY');
After changing $fields = array('type'=>'text', 'required'=>1, 'error'=>'Reason for the update required'); from 1 to zero I no longer received the error when not entering a note and the ticket updated successfully.
Then I went into: /webroot/osticketfolder/includes/staff/editticket.inc.php and removed the "*" from the notes field.