The embedded Forge versions are automatically updated when there is a new version of the Jboss Tools Forge Plugin.
If you want to use the latest version without waiting for a new plugin release, do the following:
- Download Forge 1.4.0.Final from http://forge.jboss.org and unzip in any place you may find convenient
- In Window->Preferences, look for Forge->Forge Runtimes and add the path to your installation and make it the default runtime choice
- Start the forge console. You should see it is running the latest version.
The "forge update" feature works only in the native command shell for awhile, so if you run $FORGE_HOME/bin/forge and run the update command from there it will work.
Hope this helps, let me know if you have additional questions.