I saw a post on one of the bitcoin news sites the other day talking about gavin's discussion at mitbitcoinclub and they were saying that he still says a hard-fork to increase transaction size is in the works.  That he thinks it won't be in the next version but possibly could be in the one after.  That he has to achieve consensus on with the "5 core developers" which have push access to the git repo.

“I’m actually, right now, working on just getting consensus among the five, what I call, core developers — the five developers who have push access to the git code. I think I’m getting close to convincing them that we have a plan that will work. I’m probably going to have to write some more code . . . I think we have a year to eighteen months. I would love the next release of bitcoin — the next major release, which will be sometime in the June timeframe — to have a scheduled hardfork to increase the block size in it. I probably won’t get there. It’ll probably be in the release after that, but we’ll see.”