What is a good way to keep track of the episode you're up to? So I have a list in notepad that I use to keep track of what episode I have watched:

********** Latest episode that I have watched: **********

A Certain Magical Index                         Season 1    Episode 24
A Certain Scientific Railgun                    Season 2    Episode 24
Absolute Duo                                                Episode 7
Accel World                     (anime)                     Episode 23
Accel World                     (light novel)   Volume 2    -all-
Accel World                     (manga)                     11
... etc.


And some other headings like:

*********** Finished (hopefully not) ***********

and

*********** To watch/consider: ***********

Is there a good tool online to do the same thing that I am doing but better, and will update automatically when a new season is automatically added, such as moved from the finished section to the latest section?
MyAnimeList is a fantastic option. Of every site I've tried it's by far the best. In addition to allowing you to track your anime according to a number of headings, it also allows you to specify a ton of other information, like times rewatched, rating, start/end dates, and how you have it stored (for example, if you own DVD's or BluRays of a show). Your ratings are actually aggregated with the rest of the community too - which is a very active community, I might add.

Furthermore, the site will help you track manga in the same way. Not to mention favorite characters and staff members.

Plus they have news, and there's even a blog attached to your account should you choose to use it.

If that weren't enough, it has a massive database of just about every anime and manga you could ever imagine, complete with character lists, plot summaries, staff/stuido information, user reviews, and recommendations for other similar anime.

In conclusion, MAL is exactly what you are looking for and more. Switching from a notepad document to that has saved me quite a few headaches.