Anyone know the status of the "once discussed" one time allowance for a 10K early withdrawal from 401K's? Also will this simply be a reprieve from the penalty or will it ALSO be excluded from taxable income?

There is no one time allowance for early withdrawal.
Exceptions to Early Withdrawal:
1. If you are totally and permanently disabled,
3. After your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees),
4. Made to an alternate payee under a qualified domestic relations order,
5. You have deductible medical expenses (medical expenses that exceed 7.5% of your adjusted gross income), whether you itemize your deductions for the year,
6. From an employee stock ownership plan for dividends on employer securities held by the plan,
7. Made due to an IRS levy of the plan, or
8. Made from elective deferral accounts under 401(k) or 403(b) plans, or similar arrangements that are qualified reservist distributions.

Read Your U.S. Tax Return: Elective Deferrals 401(k) Plans

What you may be referring to is the allowed early withdrawal of $10,000 for the first-time purchase of a home.

That withdrawal is allowed from an IRA, not a 401K.

What you would have to do is roll $10K over to an IRA, what an appropriate amount of time (say, 20 minutes), then do the withdrawal from the IRA for the first-time home purchase.