I'm using on my PC: Overdrive Media v.220.127.116.11 and iTunes 10.6.1.7 (which are, apparently, the latest versions available). I have an iPod Touch 4g with v.5.1.1. software.
Despite a couple of updates on all of the above, the audiobook problems that began with iOS5 have not been resolved. I still have issues with greyed out books, partly greyed out books, books that appear on the iPod Touch but not on iTunes and vice versa, out of sequence books, missing information books, books that appear on playlists and in the Audiobook section.
Some solutions work sometimes - like deleting the greyed out books and transferring from ODM again, going to iTunes and adding missing Info, etc. - but I can't predict what will work or what will happen when ODM transfers to the Ipod. Except that if it's a WMA audiobook, it will take a loooong time. Some WMA transfers are fine. Just for variety.
I don't think the "problem" is getting better as before the recent updates it was mostly just having to use playlists for the audiobooks. Now it's missing chapters and greyed out sections. Although things are often workable if I fiddle around with iTunes or the iPod, I have to say it's definitely inconvenient and time-consuming.
And don't get me started about my music.
Fortunately I've another iPod Touch that I haven't upgraded to iOS5 and I use that with ODM. It's refreshing to see my titles in the Audiobook menu, in order, no missing sections, etc.