OK, don't ask me why the fourth alpha of CM7 would be numbered 3.5, but apparently it is. They seemed to have cleared up artifacts when playing hardware-assisted H.264 videos (MX Video Player is good for this), but you still have to select software audio when playing H.264 videos. DivX videos at the typical resolution you find in downloads of TV shows play fine with software video/audio, though I do use an overclocking app on my TouchPad when running Android.
The screen-off effect (like an old CRT TV turning off) that debuted in alpha 3 has finally been joined by the reverse screen-on effect in alpha 3.5. I also installed an update to the moboot bootloader, but even version 0.3.5 sadly hasn't fixed an "obvious" flaw (the boot menu completely ignores tablet orientation or rotation).
Oh, the Liliputing and RootzWiki links for Alpha 3.5 are available as usual.