This was mentioned inas something that could be improved upon in Drupal 7, but I'm not quite sure we got the experience complete. Picking a timezone is still a complete drag in Drupal. The select list of 400+ cities is completely unnavigable, especially since it's not even listed by country (it's by continent, e.g. America/Vancouver).
I've developed a new combo jQuery library and ImageMap combination that can be easily updated (http://efele.net/maps/tz/world/ updates) in the future to support new timezone structuring. Combined with PHP 5.3's ability to pinpoint timezone locations via timezone_get_location(), we can build a pretty mean timezone picker.
The intention of this library is to be a drop-in. It doesn't have any server-side requirements, it works on all browsers IE6+ (it *is* an image map after all) including mobile and touchscreen devices. I'm going to work on a D7-compatible module for demonstration purposes, but I'd like to include this functionality everywhere in core where we have a timezone dropdown.
Demonstration of the new picker is available at http://timezonepicker.com, which will be the official home of the library, plus the GitHub source code of course (which actually hosts the whole library).