Dinesh wrote a blogpost about .NET Framework 3.5 SP1: LINQ perf improvements (LINQ to Objects and LINQ to SQL). There are three perf improvements in the just released SP1
Specialized enumerable: The new implementation recognizes queries that apply Where and/or Select to arrays or List<T>s and fold pipelines of multiple enumerable objects into single specialized enumerables. This produces substantial improvement in base overhead of common LINQ to Objects queries (at times 30+%).
Make sure to check it out!