These changes do mean that we are not pursuing a separate delivery of WinFS, including the previously planned Beta 2 release. With most of our effort now working towards productizing mature aspects of the WinFS project into SQL and ADO.NET, we do not need to deliver a separate WinFS offering.
They do mention that Vista and future MS products will continue to “adapt”, meaning that down the road WinFS support could eventually be added. The changes aren't completely clear however, and plans could be changed. The old model of WinFS is largely unchanged, but don't expect to see it anytime soon.