Let's say that I have a project that depends on 10 libraries, and within my project's trunk I'm free to use any versions of those libraries. So I start with the most recent versions. Then, each of those libraries gets an update once a month (on average). Now, keeping my trunk completely up to date would require updating a library reference every three days.

This is obviously too much. Even though usually version 1.2.3 is a drop-in replacement for version 1.2.2, you never know without testing. Unit tests aren't enough; if it's a DB / file engine, you have to ensure that it works properly with files that were created with older versions, and maybe vice versa. If it has something to do with GUI, you have to visually inspect everything. And so on.

How do you handle this? Some possible approaches:

• If it ain't broke, don't fix it. Stay with your current version of the library as long as you don't notice anything wrong with it when used in your application, no matter how often the library vendor publishes updates. Small incremental changes are just waste.
• Update frequently in order to keep change small. Since you'll have to update some day in any case, it's better to update often so that you notice any problems early when they're easy to fix, instead of jumping over several versions and letting potential problems to accumulate.
• Something in between. Is there a sweet spot?