The effort to develop native applications on iPhone Firmware 1.1.1 has made the most progress over the past 24 hours than it has since the release of the firmware, thanks to the efforts of the iPhone Dev Team.
Erica Sadun has been blogging her effort to recreate a solution which gives access to the iPhone 1.1.1 file system. Such access is a big step to allow developers to recreate the third party applications that were available on firmwares 1.0 - 1.0.2.
iPhone 1.1.1 has seen its share of controversy due to its "bricking" of unlocked iPhones and removal of any third party applications that a user had installed.
Recent rumors have detailed Apple's plans for future iPhone applications and SDK. Arstechnica had indicated that the SDK would remain web-based but see usability improvements including ability to use web-based apps off-line and access to the iPhone's home menu. Later in the day, 9to5mac posted that Apple was working with select developers to gain native access.
In the end, both rumors may be true, with Apple-selected vendors agreeing to give Apple a portion of the sales getting iPhone-native access, and the rest of the community having to stick with web-based solutions, leaving the iPhone Dev Team's efforts as the only alternative avenue for native third party iPhone applications.