When tagging an mp3 withe genre audiobook, the iphone/touch player should list that mp3 file as an audio book, and not as music. This worked well with the previous version of the ipod database, but I guess the new sqlite based backend needs some more patching to make this work again.
Versions tested: libgpod-1.7.91
Yep, I don't think it has much support for audiobooks for now :-(