I'm now running this customized Ubuntu image on a SD card in my XO. Everything works pretty much as I would hope, including re-scaling UI elements to be appropriately sized on the high-resolution screen, wireless and aggressive power management (optionally) work.
The only major thing left on my wishlist would be screen-rotation aware cursor control using the gamepad keys so I could easily read RSS feeds in ebook configuration. In theory I think I can do this by using the buttons to tab through to the links I want, but in practice I want to try just steering the cursor around with the directional gamepad key.
Also, the Fedora team has been doing a lot of work along the same lines, but I can't nail down a definitive set of instructions. I'm sure they exist somewhere.
So basically, if you bought your XO last year thinking, "This might be nice for casual web browsing around the house." and then found that no tabbed browsing was a deal breaker in your personal relationship with Sugar, and you didn't want to tweak your own Linux install, well, now you can pull out the old XO and have another go. That XO is no more obsolete now than it was a year ago.
And no, this doesn't have much to do with my overall perception of Sugar. 90% of the time, I just need a substrate for the browser, so whatever gives me a better browser wins.