From a theme developer perspective, will slideshow.php remain in the extensions folder, or will this transition to slideshow2.php eventually?

Thanks!

The "old" slideshow plugin is kept for 1.4.6 but of course may be removed on 1.4.7 to lower support as both basically do the same.

Additionally the new one hooks into the same functions including the content macro and the theme's slideshow.php so a theme using the old one should not have any problems.

The new Cycle2 script powering the slideshow2.php (successor to the Cycle1 script used by slideshow.php) has advantages. It usese HTML5 to be setup instead of script and is far more convenient if you need custom sliders with different layouts elsewhere on your theme.