In the last couple of days I have received the same question from people both within Microsoft as well as partners and customers regarding support for Active Directory Domain Services (ADDS) on Windows Server 2008 as a connected directory in ILM 2007. The other popular topic has been if we support running the Password Change Notification Service on ADDS as well.
The answer: Yes,
Hope this helps
/ Brjann BrekkanTechnical Product Manager - Identity ManagementIdentity and Security Business Group , Microsoft Corp
ps. The FAQ on the ILM 2007 Product page will get updated as well to clarify this (http://www.microsoft.com/windowsserver/ilm2007/faq.mspx)