The del.icio.us extension does indeed work with FF2. However, I immediately began having issues with it in combination with the Google Toolbar. My wife also uses the Google Toolbar, and she had the same problem. Disabling either one of the extensions seemed to solve the problem. We both chose to disable del.icio.us, as we both found the Google Toolbar more useful. She likes it's autofill for forms (I like this too) and I use its site search a lot. That's an invaluable tool for searching for things on open source forums. Those forums often provide their own search, but just using Google to search their site is almost always more effective.
Anyways, things didn't stop there. I was buying some stuff from Amazon, and FF2 froze up. This really annoyed me, especially since I had already entered in a credit card number in the order process. Of course Amazon is good at dealing with this kind of problem. I killed FF2, launched Flock (it's still FF 1.5 thankfully) and went back to Amazon. All was well, as my order was in my cart, and all I could pick up the checkout process right where I had left off.
So at this point I went ahead and disabled all my other extensions: Google Toolbar, Google Browser Sync, FireBug, and FireFTP. Maybe I'll try re-enabling them one at a time, to try and determine what was causing the instability. Hopefully the answer won't be "don't blame the extensions, blame FF2."