I don't have the Canon but have done a firmware update to my Pentax within the last year. The firmware updates are a complete entity not a patch so you are overwriting the entire previous firmware, not just updating parts of it. Because of this, you don't need to do the in between updates, you can go straight from 1.0.3 to 1.0.6.
Here are step by step instructions I found for the update you are wanting to do:
Canon EOS 50D Firmware Update
It is from Canon's Japanese site I believe but reading through it, it's steps are the same type of steps that I had to go through with on my camera. Off hand, I didn't find instructions like these on the US site. When I had to do my firmware update, it actually gave me instructions in my user manual for my camera so you might want to check there as well.
Read through all the steps and make sure you have a FULL newly charged battery in the camera BEFORE doing the update and make sure that it makes sense to you and that you have all of the buttons it talks about. Once you click that OK and start a firmware update, you need to make sure that the power is not interrupted or any buttons are pushed or you can have the update not complete and thus, be left with a camera that needs to be taken to a repair center to have the firmware put back on it as the first step the camera does is delete the old firmware and then installs the new firmware. Be patient and wait for it to do its thing. It looks like your camera will give you a progress bar to tell you how it is doing which is nice. Be patient! don't interrupt it. Wait and wait longer if you must. It can take a fair while to do the update and a few more minutes waiting is a lot easier than having to take it in to have it repaired.