Reposting an email I sent recently:
Yes, I started a few weeks ago after a (too long) hiatus. 2.6.30 kernel, which is looking nice. (SquashFS is now included in mainline. That means UnionFS is now the only kernel patch that is absolutely required.) The latest Debian testing stuff itself is pretty stable, but managed to break pretty much all of Finnix's init scripts in one way or another, but it's coming along. Unfortunately Debian's base packages are a little larger, and the kernels have ballooned between 2.6.26 and 2.6.30, so this will probably be the largest Finnix to date, about 125MiB for x86 at current estimates. It's still well under Finnix's long term goals (never to exceed 185MiB, the size of a mini-CD), but unfortunately there really isn't anything to trim.
Still, I'm happy with what the next release is shaping up to be. Looks good!