We only update on demand. For this we monitor the release rss feed, that reports on Server and plugin releases. So far we usually updated the server because we wanted to install a plugin, that was dependent on a newer version. Otherwise, go with "Never change a running system". keeping up with the newest build (or following a few weeks behind on a weekly basis, is too much work for us). The risk that something doesn't work after an update is too big.
Currently we are updating way more often than quarterly, since we use lot's of plugins and are still in the buildup phase of a rather complex system (build, deploy, and (functional) tests in a mixed Windows/Unix environment).
Updates will definitely happen less frequently when the system is set up completely and Hudson maintenance slows down. In addition we will then have to comply more closely to corporate guidelines regarding Software Changes Request procedures.