Since 1.7 is going to be PHP 5.2+, I've decided to pull some of my 2.0 code into the codebase. This means, for instance, that:
global $gCms;
Can be used in the much more clean (globals are icky):
$gCms = cmsms();
Getting a database object will go from:
global $gCms;
$db =& $gCms->GetDb();
to:
$db = cms_db();
I've made a few other additions for commonly used objects like this as well.
In addition, I've pulled over my autoload functionality. Slowly I'll be making it so classes can be loaded on first use, saving memory instead of the traditional "load everything and only use what we need." I've moved a few classes to using it already and will move more as I go.
And, what most people care about... I've added the recursive menu manager templating functionality. Now a menu manager template can be as easy as the following to get a full listing of all your pages:
{if $count > 0}
<ul>
{foreach from=$nodelist item=node}
{if $node->show}
<li>
<a href="{$node->GetUrl()}">{$node->MenuText()}</a>
{menu_children node=$node}
</li>
{/if}
{/foreach}
</ul>
{/if}
Don't panic, I'm leaving the old code in as well. We're not going to break backwards compatibility that badly on a point release.

I have to say, as a developer, I'm feeling very good about the changes that are upcoming. It's starting to take some of the ideas I've had for almost 3 years and finally putting them into motion. It's not going to be the full 2.0 experience I'm envisioning, but it's a start into a more modern codebase.