Do you need OS X Server to do SUS updating? I have 5 Macs and want to use one as the source for updates. 

Do this have to be OS X Server or can I use 10.6?

See http://www.techrepublic.com/blog/apple-in-the-enterprise/apple-os-x-server-caching-and-software-update-services/

I understand how to redirect the clients but don't know how to get a "host" machine. Is this a server only thing?
The "host" machine has to be a Mac OS X Server machine (depending on the systems of your other Macs 10.6 Server/OS X Server 1.0 - OS X Server 4.0) which stores all the update packages and the SoftwareUpdate catalog(s) and provides the Software Update service.

So one of those Server OSs has to be installed on at least one Mac to serve as a SoftwareUpdate server.



Once a method without installing a server OS existed (sorry german only). I don't know if it still works and can't prove it now. Here is a link to Software Update Enabler mentioned in the appletalk.de tutorial.