3
SE friendly URL's are a huge task, it requires not only changes to the core, but also changes to every single module wishing to use them. On top of that, custom SMARTY functions must also be made. It's coming, but is going to take some time before it is fully implemented.
I've created this for a strip down version of XOOPS I'm going to be using for my new hosting company, but all my modules are built from scratch and made to use them. This is not as easy to do with existing modules and XOOPS versions.
Hang tight, it will come, just don't expect it any time too soon.