Visual Studio 2008 and .NET Framework 3.5 were released earlier this week. Visual Studio 2008 is the first version of Visual Studio released since WPF and the rest of .NET Framework 3.0 were released a year ago. VS2008 includes a WPF designer and XAML editor, and allows targeting of .NET 3.0 or .NET 3.5 when developing and compiling solutions.
.NET Framework 3.5 includes a host of new language features for C# 3.0 and VB9. Most of these language features exist primarily to support LINQ, however .NET 3.5 also includes some enhancements to WPF. An overview of the changes in 3.5 can be found here on MSDN. Kevin Moore also recorded an interview for Channel9 before he left Microsoft discussing some of the changes that were coming in 3.5. Dr Tim Sneath also listed off 15 of his favourite enhancements to WPF here.
Some of my favourite enhancements for WPF in .NET 3.5 are supporting XBAP applications in FireFox (on versions of Windows) and the data binding and IErrorProvider enhancements (thanks in part to Paul Stovell).