Haven't flown it much, but it definitely appears to be vastly improved over the boxed form.
New ground effects when taking off, flaps have a bigger effect on lift and landing is a lot closer to reality than it was before.
Damage model, I dunno - I never had a problem with it before, and apart from a few planes being adjusted, I really don't see much of a difference.
Engine management is completely different, I have no idea what I'm doing with it. Something different about how the prop pitch effects speed and throttle setting has less of an impact on maintaining speed, while more of an impact on actually retaining speed in a dogfight.
Energy bleed was supposed to be changed, can't say I noticed much of a difference. Then again, none of the fights I had in my brief test were very strung out or had lots of edge of the envelope flying.
P40 doesn't blow up anymore as it begins to compress, actually followed a 109 through a 2km dive then shot him down as he looped.
Terrain visibility pushed out a whole lot further, now it really doesn't look all that bad at 5km.
New effects: longer lasting smoke/fire, especially noticeable when people auger in on takeoff rolls. You'll see the fire as you leave the field, and it'll still be a smoking crater when you get back. Theres also now dirt/snow/water vapor kicked up by the prop when you are hugging the terrain. See screenshots below. Didn't get one of the water vapor, but not only is there mist behind the place - "waves" sprawl out from the mist. Pretty cool effect.
The sound is... well, better than it was before. I guess this is the best they could do... although I still don't see why we can't just get some simple surround/quadrophonic sound like in AH and just mute all exterior sounds when the engine is on (except for your own guns).
Anyway, theres a list of fixes and what not if you are interested over at il2sturmovik.com Several mirror sites for it, about 42MB. No new planes in this patch. I could of sworn UBI or Oleg said the new TB-3 Zveno, Me163 and Fiat G.50 (flyable) would be in this patch, oh well.
-SW