Question : Must I upgrade Xcode 3.2.3 to 4? why? how?

Should I kick my 3.2.3 Xcode up to 4 ?

It (version 4) doesn't register on my system update.

How can I do it?

or

Is 3.2.3 the best version, now?

Answer : Must I upgrade Xcode 3.2.3 to 4? why? how?

Xcode 4 is a beta 2. At least it was so few days ago.
You do not need to switch to this version. How I know this beta 2 is available for the developers who paid money ( this 99$).
Any Xcode version is compatible with the previous versions. In your Xcode 3.2.3 for a separate project you can set compatibility with Xcode 2.x ("Get Info" for the project in Xcode - the top file in the "Group & Files" sidebar).