It seems mpurcell from Sholes has modified the kernel to allow for USB Gadgets!
- Read the post here: Android USB Gadgets | Sholes
- Read about USB Gadgets here: Linux-USB Gadget API Framework
This will allow for a completely free and unrestricted USB tether (goodbye PdaNet) as well as some other goodies (MIDI support, Serial support...). Basically, they are opening up more functionality for the Droid!