The service pack itself is done.
What they are doing now, is compiling a list of known-bad drivers, so Windows update won't show SP1 as available if you have one of those known-bad drivers.
Once a fixed driver is available, then SP1 will show up on Windows update for you.
At a high level, yes. Technically, here's what they are doing:
RTM: Released to manufacturers to integrate into new systems, as well as work with implementing new drivers.
Mid-March: Planned available release for those who wish to download it manually. By this time, they will have also released media (update and OS) for sale and shipping.
Mid-April: Those who do not download it manually will get SP1 automatically provided they don't have a conflicting driver. If they do, they will not be offered it until an updated driver is available.
The plan is that as drivers are released to correct the driver problems, then they will be allowed to get SP1. The way MS is rolling this out, it's expected that some people won't see SP1 as an available download until around May. Microsoft is catching A LOT of flack about this from power users, MSDN subscribers, vendors and all other areas for doing this because it will slow the update process down and people will not be able to take advantage of it for months.
What are some of the known conflicts:
Intel drivers (network is known as one, as are others)
Installshield wrote shitty code and doesn't conform to Vista standards. Some are listing Vista SP1 as an entirely different OS and vendors need to write new drivers from the ground up to do so.