Avalon has made an enormous amount of progress in the nearly 3 years I have been working with it. I've had some little projects at work recently, and it is increasingly a pleasure to do them in Avalon...whereas in the past, the stability and incompleteness of the OM was frustrating.
The overall significance of Avalon is in contrast to the current UI development platforms. I would classify these as:
Avalon's stated goal is to combine the best of these technologies. It can talk to native Win32 services, so it is a full-fledged replacement for GDI/User etc. It has the popular markup and styling development paradigm of HTML. It is built on .NET and so inherits that platform's robust and productive development environment and libraries. It has graphics and animation capabilities to match Mac and Flash. In fact, the one clear technological barrier for Avalon is lack of reach...MS has not made public (and I don't know of) its plans (if any) to provide Avalon cross-platform, even on Windows CE.
I have been restricted in what I've been able to post about Avalon by a couple of things: a very, very busy work schedule; and the awkwardness of using the Avalon CTP build from November. It doesn't run well on my home computer (video card?) and I only just recently had the time to set up another partition on my laptop. Hopefully I'll find some time soon to post some things. When I do, there are some topics I find particularly compelling about Avalon, and you should watch for anything published about them:
Styling and Templating