Ok, so the new beta version of Zotero has been out for about a week. In every respect the results are excellent. With a large database (I'm using one with about 5000 items) the new version (1.5) is significantly faster than 1.06 at the basic tasks of adding tags and updating lists. There are more citation styles to play with (although that's never been a major issue for me).
For about a year now I've been using Zotero, the Open Source citation / general research manager that runs inside of Firefox. I think that it is a spectacular tool for students: it can run inside of the portable version of Firefox and, because it's inside the browser, students can use it for all of their resources (even Youtube videos)...