once again i modyfied my solution … made better use of inheritence and use JPanel instead of JFrame and then added panels to it… now my code does update and move, as i used paintAll(graphics g) … also i think my code looks more simple now, even a real biggener can follow. i also added main methode to Piece.java so that u can test it as a stand alone application, and see if it adds the chess piece  .
 .
so here it is  … peace
 … peace
/*
 * Piece.java
 *
 * Created on November 29, 2006, 11:35 AM
 *
 */
/**
 *
 * @author Bilal El Uneis
 */
import javax.swing.*;
public class Piece extends JLabel
{
    
    /** Creates a new instance of Piece */
    public Piece() 
    {
        super(new ImageIcon("Bking.gif"));
    }
    
    public Piece(String image_file)
    {
        super(new ImageIcon(image_file));
    }
    
    public static void main(String args[])
    {
        JFrame frame = new JFrame();
        frame.setSize(200,200);
        frame.setDefaultCloseOperation(JFrame.EXIT_ON_CLOSE);
        frame.add(new Piece("Rking.gif"));
        frame.setVisible(true);
    }
    
}
/*
 * Board.java
 *
 * Created on November 29, 2006, 11:04 AM
 *
 */
/**
 *
 * @author Bilal El Uneis
 */
import java.awt.*;
import javax.swing.*;
public class Board extends JPanel
{
    protected JPanel[][] squares;
    
    /** Creates a new instance of Board */
    public Board() 
    {
        setSize(800,700);
        setLayout(new GridLayout(8,8));
        squares = new JPanel[8][8];
    }
    
    public Board(int h, int w)
    {
        setSize(h,w);
        setLayout(new GridLayout(8,8));
        squares = new JPanel[8][8];
    }
    
    public void createSquares()
    {
        for(int i=0;i<8;i++)
        {
            for(int j=0;j<8;j++)
            {
                JPanel panel = new JPanel();
                panel.setBackground(getColor(i,j));
                add(panel);
                squares[i][j] = panel;
            }
        }
    }
    
    protected Color getColor(int x, int y)
    {
        if((x+y)%2 == 0)
            return Color.WHITE;
        else
            return Color.BLACK;
    }
    
    public static void main(String args[])
    {
        Board t = new Board(800,700);
        t.createSquares();
        JFrame frame = new JFrame();
        frame.setDefaultCloseOperation(JFrame.EXIT_ON_CLOSE);
        frame.setSize(800,700);
        frame.setResizable(false);
        frame.add(t);
        frame.setVisible(true);
    }
    
}
/*
 * Board2.java
 *
 * Created on November 29, 2006, 11:32 AM
 *
 */
/**
 *
 * @author Bilal El Uneis
 */
import javax.swing.*;
public class Board2 extends Board
{
    
    /** Creates a new instance of Board2 */
    public Board2() 
    {
        super(); //call the super contstructor
    }
    
    public Board2(int h, int w)
    {
        super(h,w);
    }
    
    public void addPiece(Piece p, int x, int y)
    {
        squares[x][y].add(p);
        paintAll(getGraphics());
    }
    
    public void removePiece(int x, int y)
    {
        squares[x][y].remove(0);
        paintAll(getGraphics());
    }
    
    public static void main(String args[])
    {
        Board2 t = new Board2();
        t.createSquares();
        //add pawns to board
        for(int i=0; i<8; i++)
        {
            t.addPiece(new Piece("Rpawn.gif"),1,i);
            t.addPiece(new Piece("Bpawn.gif"),6,i);
        }
        //add castles
        t.addPiece(new Piece("Rrook.gif"),0,7);
        t.addPiece(new Piece("Brook.gif"),7,7);
        t.addPiece(new Piece("Rrook.gif"),0,0);
        t.addPiece(new Piece("Brook.gif"),7,0);
        //add horses
        t.addPiece(new Piece("Rknight.gif"),0,6);
        t.addPiece(new Piece("Bknight.gif"),7,6);
        t.addPiece(new Piece("Rknight.gif"),0,1);
        t.addPiece(new Piece("Bknight.gif"),7,1);
        //add pishops
        t.addPiece(new Piece("Rbishop.gif"),0,5);
        t.addPiece(new Piece("Bbishop.gif"),7,5);
        t.addPiece(new Piece("Rbishop.gif"),0,2);
        t.addPiece(new Piece("Bbishop.gif"),7,2);
        //add queen
        t.addPiece(new Piece("Rqueen.gif"),0,4);
        t.addPiece(new Piece("Bqueen.gif"),7,4);
        //add king
        t.addPiece(new Piece("Rking.gif"),0,3);
        t.addPiece(new Piece("Bking.gif"),7,3);
        //create jframe and add the board to it :)
        JFrame frame = new JFrame();
        frame.setSize(800,700);
        frame.setDefaultCloseOperation(JFrame.EXIT_ON_CLOSE);
        frame.setResizable(false);
        frame.add(t);
        frame.setVisible(true);
        //test moving one piece to see if i can
        JOptionPane.showInputDialog("testing pawn move");
        t.removePiece(1,0);
        t.addPiece(new Piece("Rpawn.gif"),2,0);
    }
    
}