Nicks right about the syswatch daemon handling the triggering of dnsupdate script.
Why don't you add some logging, by logging into the server as root and typing:
echo "debug = 1" >> /etc/syswatch
service syswatch restart
Then posting up some of your /var/log/syswatch log file after you go through a known IP event (eg. you can force it by cycling power on your DSL modem).