iPhoto '11

I installed ilife '11 and when i try to use iPhoto '11 it tells me to open iPhoto I need to update it to the latest version? software update doesn't show any updates for iPhoto. I am running os x 10.7.3.

It's not telling you that it's going to update iPhoto to the latest version, it's stating that it's going to update the library. The library structure is different from earlier versions of iPhoto which is why you received that notice.