We applied for my wife's EEA2 Residence Permit in January 2009 and just received our passports back today, January 20, 2010! My wife was approved (no doubts there, as she is Canadian born and working full-time as am I) and now our lives can finally go forward

Just a few tips for those still waiting (we discovered these few things):
1. The UKBA does not use a "first come first serve" basis to look at your application. There is not much common sense used at the UKBA in Liverpool. Instead, they go by an "Urgency" basis - if you bother them enough times, they will look at who you are. It's sad, but true.
2. Call the UKBA once a day, every day. Write down the name of the person you spoke with each time and note what they told you - they lie or misinform you all the time which will give you valid grounds to file a complaint.
3. After a few weeks of calling, demand (and I mean DEMAND in a very strong and MEAN way) to speak with a supervisor. They will try and put you off by informing you that they have EMAILED one. Do not fall for this trick! Keep demanding to speak with a supervisor until one comes to you.
4. File complaint after complaint - one for every week late, describing all the things you have been told and by whom at the call centre (make sure you give a detailed story of what you have been through with the call centre)
5. If it has been over 6 months, make sure to contact SOLVIT if your spouse is part of the European Economic Area - they will fight UKBA at the same time.
6. After a few more weeks of calling and filing complaints on how lousy the call centre agents have been (as they will be, I guarantee it), make sure that you ask to have your CASE WORKER CALL you! Your case worker will call you if you complain and call enough times. Don't be rude to the case worker. Be Calm and polite as they are now working on your case and you don't want them to get upset and take longer than it should to make a decision.
7. If a couple of weeks have gone by and there has been no change, call and demand to speak with your case worker again and again until the case worker calls you. Inform them of your inconvenience and make sure that your case is being worked on. Make sure you create a big issue about it - you are stuck in the UK until you get your passports, you cannot move on with your lives, you feel very upset because it should have only taken up to 6 months and now it's been over a year, etc, etc.
This is what we did for the past two months. After two months we just got very angry and told UKBA to give our passports back because we were going to travel and gave the date as Jan 20th (this was a week ago). We demanded our case worker call us immediately. She did call yesterday and assured that she sent our passports. They arrived today and my wife had her stamp in it. No one had informed us of this - in fact our case worker had told us the opposire, that the process would be more delayed if we ask for our passports back but we didn't care as we have had enough with UKBA.
This was our last resort - and it seemed to work after trying all routes...I recommend you try everything else and as a last resort just threaten to take your passports back. Stand your ground and don't let UKBA take advantage of you, they have no right to play with anyone's lives!
Good Luck anf thank you all for the support and advice. We are very grateful to you all.