On 2/9/09, we're golden. But, 2/10/09, we're illegal. Technically, the third-party certification only begins in August, so if you can come up with a "reasonable testing program" for your items, then you're okay. But, no one really knows what "reasonable testing program" includes (e.g. it seems "reasonable" to not have to test items that have no inherent risk to them, but that's not going to fly; some folks are trying to get things tested with XRF guns, but those things are crazy expensive too).
But, yeah, I think Ozarknana is right. Etsy would say it's up to us to comply with the law and won't force us to shut down. However, as disheartening and depressing as it is, I've seen more than one seller insinuate they'd be willing to turn in other shops for non-compliance b/c they feel crappy about having to close their own.