Last Updated: May 25th, 2011
Back in March we reported on a proposed patch to CyanogenMod that would allow users to deny apps access to certain permissions while retaining the connection to others. This lets users install applications they are interested in, while remaining mindful of their privacy.
Update: Indeed, the "faking data" patches did not make it into CM and probably never will - thanks to all who posted the correction, including the patch author. See this commit for more info.
Denying permissions unfortunately has a nasty side effect - they will cause applications that don't handle the situation correctly to force close. If an application does start force closing and you've revoked some permissions, you will see a special dialog to easily reset those permissions back to "stock" and give the app a second chance.
Last Updated: January 2nd, 2011
A few days after releasing the Android 2.3 SDK, Google officially pushed Gingerbread to the Android Open Source Project (AOSP). Shortly thereafter, developers (such as the CyanogenMod crew) immediately started working on their custom ROMs based on the AOSP code (e.g. CyanogenMod 7).
It has only been a few days since CyanogenMod released version 6.1.1, their most recent stable update, so it's still likely to be a few weeks before a stable release of CM 7 is available. Nevertheless, a group of eager CM developers and enthusiasts have taken the liberty of packaging early unstable releases of CM 7 (with Android 2.3 Gingerbread) for a variety of Android devices.