Here's a very informal scratch report on the update.
First thing is, the OTA process was incredibly easy and smooth. All told it took less than six minutes, and couldn't have been simpler.
The UI has significant changes. Overall I think it's a small net improvement, but some of the changes are a step sideways or slightly backwards IMO.
(I'd already moved the buttons around when I took this snap so this isn't the original arrangement)
I don't like the bigger buttons on the home screen, since they now take up about 75% of the real estate, blocking album art. Not a huge deal-breaker since that just means I'm not going to leave it on the home screen much anymore, but it's now a rather ugly screen on startup with those big blocky boxes and not much else. It would have been really nice if they had made the home buttons slide in and out of view with a swipe-up like the control window does with a swipe down. You can still drag them around to rearrange which button is where.
Another lost opportunity by NOT extending the functionality of those home buttons, eg letting us custom-define which tags the home buttons sort by. The inability to sort and play music by "album artist" remains an annoying shortcoming. Note to AK: this is a product targeted to audiophiles, so we are going to be serious about tagging and organizing our music--let us use our libraries to their fullest.
Another quibble is that as a previous poster mentioned, long-pressing the home button no longer takes you to the now playing screen, so moving off the home screen requires tapping on a different area. It's a bit early to render final judgment, but my first impression is that this makes the UI a bit less intuitive and using the home button less convenient, since most of the time I want to be on the playback screen and now I have to awkwardly page through the home screen after doing something in settings etc. I don't quite understand why they took the long-press function away, seems like there would have been no harm leaving that as it was.
A step sideways is that now the device remembers where you were in a particular menu structure, so for example, if you're browsing through Artists and play a particular album, then go back to home and browse Genres, then later go back to Artists, the AK takes you back to the same place where you were in the Artist menu structure. That's a plus when I don't want to jump around so much, as the same artist's albums can be browsed more quickly. But it's a significant minus when I do want to jump around, since there is no way to reset each menu tree to the root apart from tediously paging backwards through each branch, or doing a full device restart.
The main improvements seem to be in playlist and file management. It's now a menu-based system instead of the earlier drag-and-drop, but with a lot more flexibility. Seems like it's easier to add or remove items from the "now playing" list for one example. I don't use playlists much but it seems a lot more powerful than it was. File and folder management is a huge improvement too, as uzi2 just mentioned. You can now copy, move, and delete files directly on the device. Doesn't seem to be a way to rename music files but that's probably not a good idea to do that individually anyway.
I haven't played enough with it yet to see if the buffering problems are still present, that will likely take a few days since the problem only came up sporadically.
