Right now, my blog is set this way: UTC time is 2010-07-17 22:24:55 Local time is 2010-07-17 15:24:55
That's Los Angeles time. The plugin though returns a generated time per UTC zero or Greenwich time. I think it used to not do that. The "lastmod" times in the actual generated site maps are LA time though. So, this doesn't indicate that anything is broken. It's just goofy to have to do the math in one's head, especially since there are daylight savings time issues too, before one can know the local generation time by looking at the plugin's options page.
I think this is not the only plugin that was impacted by some change in WordPress. I'm no expert though, so don't hold me to it. Thanks.