Ok, here's the current status from a user's point of view. The versions I'm running are a) a week or more old and
not the 3.5.4 release but the result of building an image from the "unstable" OE data.
-ALSA sound works fine in the kernel I'm running, at least for playing sound. I have no idea if "mic in" works. I had to apply a patch by hand (only concerns C1000) but I'm pretty sure it got into OE by now.
-Suspend works great. My C1000 suspends and resumes very quickly, and once it's resumed there isn't any pause before the UI becomes responsive (GPE at least, haven't tried OPIE recently). Sound continues to play through a resume.
Timeout before suspending works fine.
-I have no idea at all about using the Z as a USB device connected to a USB host. I don't even know where my cable is.
-The bvdd kernel driver is not in 2.6. I have no idea if it will be there eventually, or if it might be replaced with a real accelerated framebuffer. AFAICT the Xserver that OZ/GPE uses does not support 320x240 mode so mplayer is pretty much a lost cause for the time being.
-touch screen works fine.
-keyboard works fine and has a nice keymapping by default. Delay before auto-repeat is a little quick to start with but can be changed by "kbd_mode -d 500" by root.
-Some fixes have showed up in GPE recently that deal with making it act right at 200dpi, which makes fonts show up at humanly readable sizes by defaults. Huzzah!
-I'm just a user and not always up with what the devs are doing so people should feel free to correct me if I've said something wrong...