Wow when I mentioned the tax credit for down payment I had no idea it would cause such a flurry on the real town community. Here is an update

There has been much talk and speculation and now it does appear that the government is rethinking this strategy. It was pulled because it appeared to violate a federal law that became effective October 1, 2008. Below are a few links about this. I will stay on top of this issue and keep you posted.
http://www.irs.gov/newsroom/article/0,,id=206293,00.html
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ (notice letter is no longer on this site)