Just spent a while to take a curious look at the Google Wave API, and ended up with a little gadget:
http://focuser-sandbox.googlecode.com/svn/trunk/gadgets/chatroom.xml
The lasting impression is that it's so damn easy to write a gadget, at least to get started with. Remind you that I'm not that experienced when it comes to HTML and JavaScript.
Limitations:
- Sometimes your message gets eatten/ignored/blown-away/killed
- Not sure how well it works for multiple participants... I only tested by talking to myself. I assume the mighty google wave will take care of the rest. :)
- It's going to be slow if you chat too much.
- Since I just threw in everything being typed in, and all the content typed in are not escaped... so basically you are able to break the gadget pretty easily.