While preparing my presentation for the upcoming iX-Eclipse-Conference, I also tried 3.1rc1 and thought to switch my example plugin to Java 5.
There currently is a problem when one of the plugins uses Java 2, the export wizard of eclipse doesn't work (See my comment on bug 84767).
But worse than this: there is no environment option to tell a user "this plugin needs Java 5" (98269). There are options for the OS or the windowing system used though.
So the recommendation is either to use a custom build with the right environment set or to restrict plugins to Java 2/JDK 1.4.