I have used the K2 WordPress theme since around version 0.9 with WordPress 1.5.
I usually try to use the most current nightly version. Occasionally, I found the nightly versions did’t work well immediately with whatever WordPress version was current at the time of the K2 nightly release but with dedication from the K2 developers everything worked out eventually. All I had to do is use a previous version (revert) from the WordPress selection menu until issues were fixed. I kept 4 to 5 sequential K2 nightly releases in my WordPress themes folder. I even used ‘bleeding edge’ WordPress releases from time to time and K2 worked.
K2 nightly version is currently at 1.1 revision 1144 from 8/24/10. This is the version I am currently using.
Recently, I read on their support forum that it appears the K2 development has ended. That is too bad. K2 has always been ahead of the curve when it came to features and usability. WordPress 3.0 has some similar features for ease of use that K2 implemented awhile back.
Times have changed. User demands change as WordPress and more are developed. Thanks to the hard work all the K2 developers put in the past years.