I gotta say the most recent, 1.3, for the sole reason that it HEAVILY optimized the graphics. from 1.7 forward I couldn't run it on fancy anymore, and it was kind of annoying needing to dumb down the graphics, and deal with massive lag spikes from hell.
now, even with the local server, there's no "spikes" of lag (unless your flying and loading chunks) and graphics can be near maxed (fancy, smooth light, 2nd to farthest render) with NO issues of frame rate. plus all the stuff they ended up adding it with it added quiet a bit of fun to play with.
Additionally I gotta say since dinner-bone got on the team things have REALLY been taking off.
I began in alpha and got my own account in early beta so my top two updates was the update with wolves!!! (i think 1.4) I think my favourite overall would be 1.8 surprisingly. I loved the new hunger and food being able to stack. All the new terrain and cave features made me instantly delete my mods and go vanilla for a loooong time. (with the exception on timber...)
It's hard to say which update is my favorite. There's so many to choose from, and I've liked all of them.
*goes to minecraft wiki*
I'd have to say that Beta 1.8, the "adventure update," was my favorite. It adds far too many of the things I use frequently, as well as villages, strongholds, and mineshafts, which give me reasons to explore. After that, I'd have to say Beta 1.7, 1.0.0, 1.1, 1.2.1, and 1.3.1.. in that order.
1.4 is turning out to be a contender for my favorite release. Minecraft has lacked in the decorative and the difficulty category for too long and it looks like it's making small improvements in both categories. 1.7 is great, but more difficulty and more decorative things is just gravy on my Minecraft.
this is a hard one but ill have to say whatever the update is on xbox, is my favorite. Whats really the point of adventure when you cant place any blocks (maybe you can place some blocks but I havent tested all of them
Minecraft Beta 1.3_01. They added smooth lighting and the ability to make seeds. It also added the ability to name worlds and have more than 5. The 1.3_01 update definitely helped define what Minecraft is today.
I'd say Friday Update 5 (Alpha 1.0.6) when boats were added. It goes well with the redstone introduced in Friday Update 3 (Alpha 1.0.1).
I started to build canal network for my boats controlled by redstone. I missed those old worlds with large waterways constructions, canal locks, boat lifts, etc. I also missed the days when Minecraft can be played on a machine with 768MB RAM.
Beta 1.7 was 2nd favorite due to piston. I mess around with lots of contraptions and built some crazy stuff. I recall having to migrate to a 2nd machine around that time.
I have high hope for the 1.4 with the frames, pots, beacon, and wooden button. They really should have introduced wooden button back in Alpha 1.0.1. We could have had arrow-controlled canal locks on our waterways!
It's very hard to say for me though, mainly because i like some updates of minecraft. Pre-beta 1.8 are awesome in terrain and makes you want to explore but the system is not there. After 1.8 the system into something good but i lost the feel for the game because of the terrain generator change. Fix it please Jeb.