Well, i haven't had much time to do a whole lot of testing but i can say this....
Use the Sid release. Lenny is already 2 years old and as a result certain software is quite outdated. Like pidgin and centerim, which no longer connect to yahoo or msn. Most of Sid's packages are all from 2010 and are fairly current.
After playing with Sid for a bit i recommend staying with Lenny. Sid is still in unstable/testing and i found some issues with it. Pidgin is also current if you install the backport.
As for what works that i've noticed in my limited time tinkering:
Boot time is much
faster. I'd guess about 15 seconds vs 45 with 2.4 kernel.
Keyboard driver fixed. No more random keystrokes.
Bluetooth driver is built into kernel and does load without errors at boot, however i have not tested it with anything yet.
Ethernet and wifi work. Use ifup eth0 to start ethernet, or the wireless config script i added for wifi.
Mounting usb works for ext2, ext3 and vfat. Haven't tested cdrom drive yet. (sd is already in use for the root file system)
Battery status is said to be working, but i get some varying results when i run "cat /proc/jz/battery-status"
LCD backlight is controllable using "echo 150 > /proc/jz/backlight" (150 is an example. Lower # = dimmer, higher # = brighter)
Sound not working with SD card install. Apparently sound does work if you install to NAND and apply some kernel patches. Seems to be some conflict when running the OS from SD card. I'm not going to try this yet until it's been further tested by the kernel devs.
As for software, all works as it should. Just remember the limitations of the machine. Stay with fluxbox or jwm for a window manager. XFCE etc is too heavy and slow. I'm actually quite happy with my current setup which is console only. It's fast, barely uses any ram, and i've found console versions of most everything that i would use on an X11 desktop.
Once sound issue is fixed it will only be that much nicer. Mplayer works in console, netsurf and links2 for graphical web browsing in console, finch/centerim for messaging, sdl games can also work in console, and the list goes on and on.