(XO) 2.0 has been replaced by two things: 1) model 1.75, same industrial design but an ARM inside, 2) model 3.0, totally different industrial design, more like a sheet of paper....
[Editor's comment: By "model 1.75," Negroponte is referring to an upgraded version of the current green-and-white XO laptop with a different processor inside---a faster chip made by UK-based chipmaker ARM. The Generation 2.0 XO laptop was to be a book-like pair of touchscreens, but would likely have been too expensive to build. OLPC has not released further details about the paper-like "3.0" model Negroponte describes.
I never took the 2.0 vision seriously and will take the same approach to XO 3.0. However, a 1.75 with an ARM processor sounds like the right move.
olpc and Sugar are doing a good job of keeping the ball rolling, doing real deployments, keeping the XO in production and shoring up the software stack. Don't be shocked if there's a real breakthrough in XO sales two or three years from now. I'm not saying it is likely, but it is certainly possible.