1. Do i have to move the su file back to the bin after update or will it work in the xbin the same way?
You must move the SU file if you want to maintain root status.
2. Should I wipe data cache somehow (gotto look up how to do it again) before update or is that only if i sbf flash?
To wipe: Hold Pwr + Home Button then Select "Wipe Data/Factory Reset".
However, you only NEED to do this if you flash the SBF. Also, if you have deleted any of the pre-installed apps you will get an error when attempting to update, in which case you will have to SBF flash.
3. What does factory reset do exactly (delete apps that i have put on, contacts, messages, ect.,)?
Factory Reset will delete all info on the phone; it won't touch your SD Card. So messages (Other than voice mail), contacts, and apps will be wiped clean. However, Google has your contacts backed up so they will be restored after signing into your google account, post-wipe.
Also, any purchased from the market will be available to re-install via the Market -> Downloads menu.
4. What would be the best way for me to update.
Well, if you want to keep your Apps and Messages, and you haven't deleted any stock apps, you will probobly be best just upgrading w/o a wipe.
However, it's really just preference. Some would argue that wiping the phone pre-update make the phone faster, and some would dispute this. Really it's your call.
All the best,
Eric