Heh, mine has never done anything but show the top of the alphabetized list of all servers.
My guess is that you don't have "Move to top of list on connect" in mIRC Options -> Connect -> Options checked. With that enabled the list should be updated on new connections.
On that note, I've always wondered whether this is a bug. I don't see why that option would need to affect the recent servers list at all, especially since the servers.ini has a separate section [recent] to maintain that list, so moving items to the top in [servers] shouldn't be necessary for it to work.