1. More options to customize our blogs. I know this is a significant undertaking, but it seems odd that a blog site run by the specialist in customization has the least customizable (and subjectively least attractive) blog site on the net (at least that I am aware of). I don't even think we need to be able to edit our own HTML or CSS, but at least some different templates and the ability to add/remove sidebar items at our discretion. I understand some of this may be coming.
2. My biggest complaint would be the fact that my blog just doesn't feel like my blog. Every individual blog is just so homgenous that it feels like I am contributing to some meta-site, not like I am writing on my own blog (with enhanced social interaction). This, obviously, correlates to #1, but at this time is the biggest obstacle, to me, of encouraging participation.
3. A rich text editer is really useless if it doesn't at least work in the two most popular browsers. The fact that it is broken in Firefox is actually pretty embarassing.
4. Stop encouraging people to use programs such as Windows Live Writer. Telling people that the program works better than the rich text editer, and is the preferred method of posting, is weak. It is great it is an option, but users shouldn't have to resort to that. We should be able to adequately use the built in editer, so that the site is fully functional cross platform and for those who may not always be using their home PC to post.
5. I understand the need for ads. I really do. And most of them don't offend too much. However, the ad stuck in between the end of the blog post and the beginning of the comments is usightly, obtrusive, and just plain cumbersome. Above, below, to the side, fine. But please, please get rid of that one ad spot. Oh, and the little cluster of "Popular Articles" junk between a post and the comments is annoying as well. If I want to see popular articles by said blogger, I can look elsewhere. Chances are good the reason I am on that page is to read the article and associated comments, not look for other crap.
6. Agreed with the need to either A) increase the resolution of avatars, or

decrease the size of the avatar displayed at the top of the user's blog.
7. Agree with San Chonino about the avatar cluster**** at the top of the home page. It is just garrish and not helpful at all.
There are a few thoughts for now.