I just bought my wife a Sansa e280.  One of the selling points was that I read in several user comments and reviews that it worked well with Linux and Amarok.  My wife is running openSUSE 11.0.  She tried setting up the device and managed to move songs over, but none of the playlists moved over, nor album artwork.  I haven't looked at it myself yet (just listened to my wife complain) but I believe she set it up as a generic device.  (Ideally, it would be neat if Amarok could recognize the hardware and set up rules automatically the way that Windows Media Player does!)

Are there specific settings I need to set to get the Sansa e280 to work properly in Amarok?

The Sansa uses a different playlist format than Amarok. You can find more about the playlist issue in the user forums on anythingbutipod.com (long story short: There seems to be no easy way to use your playlist with the Sansa).

I do not know how Amarok transfers album arts (does it?) As far as I know the Sansa requires you to add files named folder.jpg or "Album Art.jpg" to the folder with the music files. I am not sure whether the Sansa can handle id3 album art (I doubt it as the Sansa has even problems when there are multiple id3 versions in a single mp3 file etc).

You can take a look at Rockbox. It might have the features you are require (it even supports oggs) and is rather stable (also compared to the original firmware).

I use Amarok (1.x) with a Sansa e280 (that runs Rockbox).  I also set it up as a generic UMS device and it seems to work fine for me. 

edit: I can definitively say that Rockbox does not read album art in metadata.  I will keep looking for info on whether or not Amarok syncs album art (hopefully as a separate file).