I got the LCD shield in the mail today. Merry Christmas. I downloaded fresh copies of the library.
The demo that came with the shield library was able to compile and fit, using both Arduino-0011 and 0012 environments. However, either there's an electrical or software problem with the included demo. It initializes, draws the menu, and goes straight to a solid blue screen, regardless of the actions I try to do with the joystick. This all happens so fast that I only see the menu being drawn sometimes. Blink and you miss it.
If others can confirm that the demo program works, it might be a solder error or other issue with the board.
andyp, on the off chance it was the demo software, I tried your reversi example, and neither Arduino-0011 nor 0012 (OSX) were able to build for the Duemilanove. They both complained about the sketch being too large. The 0012 was just 30 bytes over the limit, and the 0011 was a bit larger. I will try your clock example next, as that should be a bit smaller.