I already reported about Scratch project back in May 2005.
Meanwhile the project made some progress and a beta version is available for download. You can also have a look at some movies introducing the system.
Scratch is written in Squeak. It's interesting that the image is only 6MB in size. The virtual machine is a 3.4.3/Tea 1.9 VM. The system is very responsive even when loading large images and sounds.
I also like the Scratch user interface - it looks much better than Squeaks default one. Would be interesting to know if it is a custom one or a modified Morphic system. Remembers me a little bit on the nice UI from the Exobox project (which was also implemented in Squeak Smalltalk).
Looks like the Squeak and Croquet community should hire a designer to take over the world ...