L2S will continue to be supported from what I understand, from what I remember from the last PDC, all the attention is paid to L2E for .NET 4.0.
From my experiments with the current state of L2E, it is "less than adequate." Especially in the field of speed. I did some simple performance testing, and my L2S queries were sometimes 2-4 times faster than L2E, and even with pre-compiling L2E views.
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