Well, it appears so though we were mistaken. Both abu aufa and I were suddenly able to visit sites that used to be blocked, which led us to believe the blocked domains of the Windows hosts file were not being recognized by Opera 10. As you can see by my
thread on the Opera forums, the hosts file is actually still working. It turns out that the reason we're able to visit those sites, is the hosts files have been updated and those domains are no longer being blocked.
For example, in all the many years I've been using hpHosts and MVPS, www.myspace.com has ALWAYS been blocked. So when I was suddenly able to visit that site, I assumed it was a fault in Opera. As it turns out, my hosts file is simply not blocking MySpace anymore.
This is actually a really good thing, as we can continue using the hosts file to block bad sites and ads in Opera! I really like Fanboy's AdBlock list, so I'll probably continue using that in conjunction with the hosts file to add another layer of protection.