The biggest improvements since 2005 have been in the Hijack kernel, at which Mark continues to poke for incremental increases in goodness. I don't think there have been huge dramatic changes since 05, just lots of little things updated.
Hard disk sizes continue to increase, with Mark's kernels and builders now being the preferred method of disk upgrade (over the Empeg official ones) so that you can be sure your new large disk is supported. See the disk upgrade guide at riocar.org for updated instructions.
edit: With the increase in hard disk sizes, we've now reached a point where the player's limited RAM, combined with limitations on the size of the dynamic data partition, gives us trouble indexing particularly large music collections. Some tools have been implemented to help people around this problem.
Some people are using compactflash-based and SSD-based storage instead of hard disks.
There was a display extender project a while back, and those who bought them can now mount the 'peg in the trunk and run the display and front panel up to the cockpit. Solves that "unsuitable car" problem you mentioned.
V3 Alpha never got finished, so if you want stable player software, stick with 2.0 final.
One of my favorite hacks for the player is Emphatic, which lets you customize the display and also scroll lyrics in synch with the music on the display.
You can run a fairly advanced web server on the player from which you can browse and stream your music collection when it's plugged into your home LAN.
Hugo works for Apple now, working on hardware board-level stuff on the iPhone. Go figure.
This BBS continues to be a strong source of interesting conversations and great tech help, feel free to cruise the off topic forum.