Now a straight forward workflow to do this is present in the below link.
http://udig.refractions.net/files/docs/uDigWalkthrough2.pdf
Point 3 of page 8 states to change to the ‘Edit Geometry’ tool from the tool bar.

But I can’t find this anywhere in the uDig interface.

What could I be missing?
Do note that the service added to uDig is a WFS-T service from ArcGIS Server and not GeoServer.