I've been told in IRC that the 1.0.2 release is horrible when doing blog-by-email. I've experienced this to be true. It sees some e-mails (2 out of the 4 i've sent so far) and the emails that it did get, it dismissed the user/pass as invalid, which is not true.
My real question is, if anyone got blog-via-email working, what version of WP are you using? This feature is critical, and I'm willing to install a version of WP that has this feature with some extent of reliability.