The rumors regarding the merging of Pocket PC and Smartphone versions of the Windows Mobile platforms were, unfortunately, just rumors, but there were plenty of other items that did materialize in the new version of Windows Mobile- Windows Mobile 5.0, announced officially today. Here is a link to Bill Gates' Keynote.
As a user, my response to the keynote is "meh". And that probably won't change for a while.
As a developer, my reaction is "SWEEET"! I was looking forward to the PPC/SP merging, but even without that, Window Mobile 5.0 looks like it is going to be a lot more fun and powerful than the current version. The Camera API and phone APIs should make for some very cool toys coming soon to a Visual Studio 2005 Beta Smartphone Emulator near you. In 6 months or so, those apps (and the OS) should be reaching some customers and we'll see my "user" reaction improve.
For more info, Bargain PDA gives some Windows Mobile 5.0 details.