I'm not going to speak for musicman as far as what he's managed or been able to do. But, since you're asking, I'll give you the best update to it I know of.
After talking with him the thought was to go with a 4x3 layout instead of the standard iphone 4x4. Reason for this was to gain a bit more usability on the 2.8" touch screen as compared to the larger iphone one. It allows for slightly larger icons which become a bit more finger and screen friendly.
To continue along, it was thought that the "4th" Wall would work best being a launch of standard apps, ones that are for the most part native to the Touch. This way, anyone could use that 4th wall without having to do a lot of registry editing to get it working. However, on the "3rd Wall" (standard launcher) you'd be able to swap out icons and such to get a bit more of customization.
To go with this, I tried to give him a general idea of what I'd love to see the other two walls (Media and Contacts) to look like.
Finally, to give it a slightly unique feel compared to the standard iPhone themes, I went with a "Chalkboard" icon set of iphone icons I found online.
Now granted, all this is just kind of in theory right now. Over the weekend I hope to look a bit further into how to actually make the REAL background files, and actually animate if I have to. However, Music was working on it a bit. Saying that though...he's got a real life, other things PPC related i'm sure, so personally I'm not expecting some giant leap anytime soon.
Anyways, for anyone curious, here's the prototype for the 4 walls I have sent over to him to see what he could do:
4th Wall - Stock Launcher (as a note, I've redone the excel and word icon so they are white inside, thus matching the others.)
S2U2...Calender...Contacts
Word...Excel...Notes
Photos...camera...Live Search
IM...Browser...WMP
3rd Wall - Custom App Launcher
S2U2...Pocket IRC...Games folder
Weather...Real Player...Spb Clock
SMS...Calculator...MS Money
IM...Browser...WMP
2nd Wall - Media Launcher
1st Wall - Contacts
Rough layout there, we'll see if it continues forward and in what incarnation...but it is nice to know some others may be interested.