There hasn't been a lot of noteworthy progress on opening up 1.1.1 like there was on version 1.0 of the firmware, and that's to be expected. However, there were some valiant pushes forward last week, by prominent iPhone hacker Erica Sadun who mapped out the filesystem of the 1.1.1 update. This is notable as it pre-empts the requirement to decrypt the filesystem before inspecting files and whatnot.
The other notable incidence is a TIFF image buffer overflow, which essentially means that interesting things could be launched on an iPhone by viewing a malformed image in Safari. It's within the realm of possibility that a custom-crafted TIFF picture could, for example, install a running copy of ssh on an iPhone. Or download and install a ringtone. Or any other payload a creative hacker could stuff in there, really. It's altogether possible that the next wave of users hacking their iPhone's software could be through browsing to a web page and viewing large malformed TIFF files in a particular order.
p> My guess is that it's safe to say that it will still probably be at least a week or two before it's possible for your average user to hack the new firmware; there's no guarantee that either method will bear fruit. The malformed TIFF will likely require a less-straightforward heap overflow, as the stack on the iPhone is set to no-execute. To rephrase that last sentence in English, it will probably take the hackers a while to get the corrupt TIFF image with code inside to do exactly what they want it to do.