still a ton of work to do, but it's a start:

$ tar xvfz PIL-1.2a0.tar.gz
...
$ cd PIL-1.2a0/
$ python3 setup.py install --prefix .
...

$ cd lib/python3.1/site-packages/
$ python3

Python 3.1.2 (r312:79147, Apr 15 2010, 15:35:48) 
[GCC 4.4.3] on linux2
Type "help", "copyright", "credits" or "license" for more information.
>>> from PIL import Image
>>> im = Image.open("../../../Images/lena.png")
>>> im
<PIL.PngImagePlugin.PngImageFile image mode=RGB size=128x128 at 0xE6B1D0>
>>>

the current 1.2a0 snapshot can be found in the development repository.

I just tagged and posted tarballs and binaries for 1.1.7 final, which is basically release candidate 1 with very some minor tweaks.  If you're upgrading from 1.1.6, you'll get tons of bug fixes, and numerous new features, including colour management support (based on Kevin Cazabon's pyCMS package), improvements to the PNG codecs (support for reading interlaced files from Conrado Porto Lopes Gouvêa,  improved compression from Alexey Borzenkov), improved support for Python 2.5 and later on 64-bit platforms, and lots of other tweaks and fixes.  For more details, see the CHANGES file.  Many thanks to everyone who's contributed!