I'm using the SDL you provided. I know it's not optimized for the Cxx0 series, but it's damn fast regardless!
I'd say it's certainly quite playable besides the memcard issue. I tried a bit with FF7 also, and there's a bit of glitching at the top of the screen and on the pop-up dialogue thingies and the bottom-third status thing in battles, but the full-3d battle sequences run much, much smoother than they ever have. I'm overclocked to 471MHz (fastest you can get the Cxx0 devices) and using about 40% psx clock. I'm used to having to turn the sound off to get max performance, but it's still quite playable with it turned on. The improvement with interlacing is minimal compared to how it helped in the past.
Overall, I'd say that if the memcard issue is resolved, it'd be the best release yet, even with the minor glitching in FF7. I'll have to bust out some more games to try, but as far as I see it, this is a big leap forward... I can only imagine a fully optimized GPU and the 2.6 kernel!