I've heard that there is not going to be any SMB/Samba (smb:// streaming) support in Amarok 2.

If I was a developer then i'd jump on the bandwagon and help out, but I am not an application dev.

Can somebody confirm the plans for this element in Amarok 2 and if it is in development. Having to mount smb makes Amarok amateurish.

So smbclient or KIO can be used for this and preferably should handle incorrect logins with an interactive password prompt.
If nobody want's to put the effort into KIO then perhaps port the code from Amarok 1 and add interactive logon support.

If any developers can comment on this, i'd love to hear the story...

SMB will be supported for playback, if Phonon (KIO) supports it.

As for the local collection, it can only support local files, but you could use smbmount, or use the Nepomuk collection (once finished).