/\ The later. ;)
I've been working on a the equipment/bag system, Av3n has been working on spells and Craka' has been managing everything. I'm not sure what the FX and player modelers are doing though.

I'll try to have an incomplete demo of the bag system done and in the campaign by Thursday-Friday at which point I'll send it to Craka' who'll upload it.
It's coming along, it's just that RL is taking up a lot of time.

The inventory system is going to be really cool when it's finished. It'll have purchasable bags, equipable items, durability and the new money system that IronWarrior made.
It's taking a while, but it's a huge undertaking.
So, please pardon the wait. :^)