After talking with a few people in the community, I've decided that it's probably best to wait until after the holidays before releasing the next GMod patch (ie, early 2008).

Since I'm getting a constant stream of emails regarding the patch, here's some facts about it.

• The update is free (If you already bought Garry's Mod)
  
• Old saves will be incompatible (sorry!)
  
• Old demos will be incompatible (sorry!)
  
• Will work on DX7 hardware, but some of the newer features won't work on DX7 (like the new particles). It's really time for you guys to upgrade your graphics cards if you can.
  
• Addons should remain compatible for the most part.
  
• Gamemodes should remain compatible for the most part.
  
• New NPCs from HL2:Episode 2 if you own it
  
• New Props/Maps/Ragdolls from Ep1/Ep2/Portal/TF2 if you own them
  
• Portal gun will NEVER BE ADDED TO GMOD. (Debugging nightmare)
  
• Update is currently in beta, accessible via the forums, and requires EP2.
  
• When the update is released properly it won't require Episode 2.
  

Sorry, the broken compatibility with old saves/demos is unavoidable. This is one of the reasons I've decided not to release until after the holidays.