I collect all of the content since the last reel, and convert everything to the same format (necessary if you are pulling from different formats). Unfortunately, I sometimes have to pull from YouTube or Vimeo for projects I was less involved with. I like to convert to ProRes, its a happy medium (in my opinion) when you have 4k RED and YouTube in the same timeline.
I then duplicate my FCP file, and start a new timeline and then edit the new content into clips, and combine/replace with previous clips from the old reel. It really depends if I have something really awesome and exciting to incorporate/feature, or if it is just an update. I then export, and save the old reel in a folder. I do not do anything with physical media anymore.
I don't worry about the reel too much, my latest one is a bit over a year old. A reel is not really necessary for my job, but I like to have one. I also still use FCP7.