latest setup

I'm going to update my 4 axis machine the latest version that is out. Will this require me to update Ubuntu as well?
Current system is 2.5.4 with Ubuntu 10.04 (Lucid)

No, all you should need to do is change or add the repository "deb buildbot.linuxcnc.org/ lucid base 2.7-rtai" then run an update.
instructions are in the docs.
linuxcnc.org/docs/html/getting-started/updating-linuxcnc.html

You might have to make some minor changes to your config files such as commenting out or removing the line
loadrt probe_parport
if it exists in your hal file.