Per some other recent threads, I now have 1.6 on both my iPad 2 and my iPhone 4.
As best I can tell, Dropbox syncing is working brilliantly on the former but not the latter. It gives every impression of syncing, and after the first time it instantly reports that there's nothing to sync (as one would expect). However the most recent entries in my notes are missing on the iPhone, so it pretty certainly isn't updating from the Dropbox files. (But it will still sync successfully with my mac over wifi.)
It may help to isolate any possible bug if I mention that the user data in Dropbox was initially created by syncing with Dropbox on the iPad. I installed it on the iPhone a day later. The iPhone app appears to correctly locate the existing dropbox files - but as I said it doesn't update its data from it.