CyanogenMod, why doesn't Market self-upgrade?
It probably has nothing to do with CM; the Market is just really, really bad at updating itself.  Sometimes clearing the data for it will help, but sometimes you'll additionally need to install a newer version manually before it will start updating itself again.

I've installed the 3.4.4 Market from Android Police a few times, if you're looking for a safe file.  Just put it on your SD card or internal storage (make sure it has the .apk extension) and install it via a file manager.  Settings -&gt; Applications -&gt; Unknown sources needs to be checked for this.