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Hi, Paul, this is a non-commercial reply - we just met in the lounge(!)
I'm a distance-learning mature student of Spanish living in the UK and I recently got involved in a Second Life experiment related to that course, which is also how I come to be Moodling. I'll be making some similar comments to those below to my study provider.
SL is an environment that's "obviously" got huge potential - and I think this judgment is sound - even though it when you think carefully about what that potential might be it somehow fails to come fully into focus.
I think the key element is the opportunity for a lot of interaction, particularly talking, with real people with to whom I might, as in RL, have to convey real information, emotions, requests, etc. in Spanish. A previous experience which I would happily repeat involved Moodle, Skype, and a couple of webcams. The visual cues are important (though sadly there is only random body language!), the ability to talk (nearly) real time is paramount, the remaining element is the interactivity.
I'd love to see learning within SL go further, but one thing I'm fairly clear about is that I don't want it it to be simply a fairy dell where I go to drop my assignments instead of posting them in a boring old HTML input box, nor do I want it to be a very pretty slide-show machine. As one part of a full environment which means I don't have to "go somewhere else" (leave the SL environment) to do the posting/viewing - after a hastily completing it in the "library" maybe? - it's a nice idea, but it's not the main feature.

Richard H

Really interested in these kind of things, is it integrated with Moodle now? Can see any demo in action? thanks