L.How important is it that I update firmware 1.0.4 to 1.08 on my 40D slr? 2. Is there an adapter that will work with FD lenses and the 40D?

The firmware update (Version 1.0.8) incorporates the following improvements and fixes.
1.Fixes a phenomenon in which Image Stabilization operation emits a sound when certain buttons are pressed, with the EF-S 55-250mm f/4-5.6 IS lens attached to the camera.
2.Fixes a phenomenon in which the Image Stabilization operation emits a sound from the lens when IS lenses are attached to the camera.
3.Fixes a phenomenon in which a part of the image looks unnatural when reviewed on the LCD.
4.Corrects errors in the Spanish and Norwegian menu screens.

So if your camera is working properly for your purposes, and you don't use any IS lenses, you don't really need to update the firmware.

In answer to your second question, I don't think so. All EOS cameras communicate with the lenses completely electronically, and so work with any EF or EF-S lens. You may be able to find an adapter which would physically match an FD lens with an EOS camera, but all settings would have to be done manually on both the camera and the lens, and it would definitely be trial and error. The metering function in the camera depends on receiving a lot of information from the lens to get the correct exposure.