Yes, BUT, you will the have to re-jailbreak it. Make sure that the new software CAN be jailbroken on your ohone BEFORE update

Why bother updating? Most of Apple's updates to the iPhone are to fix security holes that allows the phone to be jail broken and hence, making it harder to jail break again. Rarely are there performance improvements.

It's silly, you own the damn phone you should be able to do what you want with it.