My previous cameras were stabilized superzooms (sony H1 and H5) and now I shoot with a stabilized DSLR Olympus E510.

The stabilization on the superzooms worked amazingly well. I found handholding (=) 768mm to be no problem at 1/200 or above. Below that I'd brace against a tree or similar, which worked fine. Of course, that's with good handholding technique - I taught rifle shooting years ago in boy scouts, and the same shooting techniques transfer completely to photography.

The longest I've shot on my oly is (=) 510mm, and It works well also.

It's pretty obvious to me that body stabilization exceeds lens stabilization. The sony A900 proves that sensor size is not an issue. The olympus firmware allows the focal length to be changed manually, so that full-manual lenses can be used with stabilization. I can duct tape a 400mm lens to the front of my E510 and use it stabilized, even if the metering and AF don't work because I can set the stabilization focal length to 400mm. REALLY nice firmware upgrade for legacy lens people. It also means that the IS behaves differently at different focal lengths, so there is no reason that it shouldn't be as effective at 500mm as it is at 25mm.

Also, olympus upgraded the IS on the E3 body last year, and have upgraded it again on the E30 model being released this month - that's two upgrades in two years, and two IS lenses I didn't have to buy.

Canikon are holding on to lens based stabilization for two reasons: Body based doesn't do anything for film cameras, and they've both professed that lens based is better than body based. I have a feeling that they'll cross over soon also, especially with the a900 on the market now. It doesn't make sense to put IS in the lenses anymore, especially with a digital based market.

Edit:

Where I really see the IS working is handholding at very slow shutters, from 1/15 to 1/30s. Indoor shots at those shutters are totally possible, and common, with my 50mm (100=)