Finally got a chance to use this today. It's not very intuitive at first - I didn't realize that after taking an hour to analyze my library I then had to hit refresh to actually fill the playlists (maybe it's supposed to and this is a bug) but once I started using it it made more sense.
I am not a fan at all of what it does to my playlists - basically it adds a ton of different playlists that all start with MSphere a01, b03, etc, then the name ("Feeling Bright", "gloomy", etc). In itunes this is ok because it groups all those playlists in to their own folder where you don't have to look at them all.
On the iPhone/iPod/iTouch itself, and the AVIC too, it's a different story. On the device, you get a big long list of all 20 or so of these, all starting with the same name which is too long to see the differences between, and mixed with your other, real playlists. Not a fan of this approach although I get why they did it this way. Really clutters things up though, even on the AVIC itself (when viewing your regular playlist list).
On the AVIC Musicsphere works exactly how you've seen it in the demo's. It's pretty neat, although I'm really not sure what makes it different from Genius playlists, as the concept is the same. It did manage to mix a lot of my songs in ways that worked good, that I would not have expected, so points to it there. A couple odd choices here and there (it stuck a hard-charging Pixies song in the middle of the "calm" playlist - quite a jarring transition 
) but overall not bad.
If there's a way to collapse playlists on the iPhone/AVIC so I don't have to see all 20+ MusicSphere playlists please let me know, other than that it's pretty cool.
