Not sure whether this should go into the official bugs reporting system or not, but anyway:
Using sudo_1.6.8p8-1_armv5tel.ipk from the 1.10 feed. A couple of problems:
1) The sudo binary does not have the setuid bit set. The fix is:
chmod u+s /usr/bin/sudo
2) The file /etc/sudoers has the wrong permissions. The fix is:
chmod 0440 /etc/sudoers
-- cheers