Hi Atlanta Tax Expert,
I read your Sticky Announcement Part II.

I think I can file as a resident alien by virtue of "CHOOSING RESIDENT ALIEN STATUS" that appears on Page 9 of Pub. 519 since:
a) I am married
b) Both me and my wife were non-resdents at the beginning of the year (F1 & F2 respectively)
c) We are both resident aliens at the end of the year (H1B & H4 respectively)
d) We intend to file a joint return

Do you agree?

IF you agree: then my second question is since we had change of status on Oct 1, 2005, do I still have to wait for the substantial presence test to be met for 2006 or can I file right away using Form 1040? (PS- I have already filed for an extension using Form 4868)

Thanks

Yes, I agree.

Yes, you MUST wait to meet the Substantial Presence Test. The SPT is what qualifies you to be a dual-status alien, and THEN you can claim the option to be treated as a resident alien for the entire tax year.