Firefox just released version 3.6.7 of their excellent browser, and it fixes this:
http://www.mozilla.org/security/announce/2010/mfsa2010-46.html
This leaves 4 of the 5 major browsers with fixes (more on this in an upcoming post), which is my threshold for documenting a little tweak to exploitability. It is partially inspired by Gareth Heyes' attack on E4X using character set overrides. For interesting background reading, see:
http://www.thespanner.co.uk/2009/02/24/inline-utf-7-e4x-javascript-hijacking/
Turns out, the same character set override applies to loading cross-origin CSS via the <link> tag. This means that you can use UTF7 in Firefox to get around one of the key restrictions in the original attack. Specifically, you can force the CSS to be interpreted as UTF7, which makes injecting either type of quote (single or double) trivial to do without it getting escaped. Of course, the larger newline-related restriction remains in sane browsers.
Also, it's worth documenting how the character set override works. Interestingly, in all the browsers I tested (Chrome, Firefox, Safari) -- any character set specified in a site's HTTP headers has a higher precedence that the attacker's attempted override in the <link> tag. Useful. You should always specify character sets where possible. It has also defended against other previously unknown attacks in the past.
One final note is that not all browsers support UTF7. Chrome for example does not. I'm sure no-one would shed tears if UTF7 died.