Things are coming out smooth :) After some bug-fixing on software side, and some new improvements, ZPUino runs on Papilio One FPGA (S3E-250), and is able to program sketches and even program itself. And programming is quite faster than "traditional" JTAG-based programmer (think 300+ seconds versus 20 seconds to program FPGA bitstream). The Arduino "ASCII" example runs perfectly now. I'll try to get all other examples working soon. Serial buffer was increased to 2Kb, and programming now uses 1Mbps instead of 115200. Some new routines were added to bootloader to allow fast programming of SST flash devices.
Another feature is soft reset using the serial line. So you can reset ZPUino even when it is in a very bad state, just by sending a "serial break", of a special serial code using 300 baud rate. Very useful for programming (no need to hand-reset), and when you use some serial terminal (just send a break and it will happily reset).