Revit help files says that a linked CAD files will automatically update within revit when you close and open the project. However, sometimes a CAD file refuses to update itself. In such a case, you could go to File menu > Manage links and select the CAD link and hit "Reload". Most of the time this does it.
Else, you have click "Reload From" from the Manage links dialog box and then select the same file. This definitely does it. (both these options will still keep the layer settings, colors, etc. intact as long as the "Preserve Graphic overrides" option is checked.)
However, if you link a CAD file, and then do some graphic overrides in Revit (switch on/off layers, etc.), then go back to CAD and switch certain layers on or off, this change will not be updated in revit! (kind of the VISRETAIN sys var in AutoCAD)