Seth,
Updating from 3.1: An update from 3.1 should be seamless. Simply, running 'yum update' should get all the latest packages from your local mirror repository. Keep in mind this is a lot of updates from 3.1 to 3.3. You may need to free up some disk space in order to complete this update. This will update your centos-release to 3.3. At this point your yum.conf should be pointing to the 3.3 path by using the $releasever variable.
Somehow yum update does not find any updates. I am using the following base url for updates:
baseurl=http://archive.cs.uu.nl/mirror/Linux/cAos/centos-3/$releasever/updates/$base...
Thanks,
Taco