There are again a HUGE number of major improvements from the 03x series to the 04x series and in my opinion the upgrade is well worth the time involved. Because with any major upgrade you will have to start from scratch. However depending on what you use FREESCO for really depends on what I would recommend. This of course is also somewhat dependent on your hardware. the 02x series had a minimum of 8MB of ram the 03x series up to 036 also has the same , but 037 and later have a minimum of 10MB of ram and I don't recommend running any of the 04x series with less than 16, although it will run on 12MB. I also recommend a Pentium class CPU, but depending on if you use FREESCO on a high speed network or just as a dialup sort of changes that requirement, because a 486 will handle dialup.
The major improvements of the 04x series is the automation of the packaging system and the multilingual capabilities. Although there currently are no other translations other than English. But I suspect in the near future there will be.
As for security there hasn't been any real improvements or vulnerabilities fixed or found since about 0.3.6
What I REALLY recommend doing is to download the latest version of FREESCO and inside the main freesco-041.zip file you will find the "History.txt" file and you can read the entire change log since the release of 0.3.0 up to the current version and then decide for yourself what version is right for you. regardless of what version you choose I REALLY do NOT recommend continuing to run 0.2.7 or ANY version of 03x below 0.3.6
Regardless of any of this you can always just try out any version running it from a floppy to see for yourself what is different and if you like it then move it to the hard drive.
If you are afraid that you might make a mistake. The chances are high that you will never learn anything.