Notch had pictures posted of the round sun/moon phases that looked really awesome. They were still pixelated, but looked great. Keep in mind, Notch prefers the round ones too!

Personally, I dont really care. The square sun and moon are iconic symbols of Minecraft that represent one of it's main features (it is made of cubes). On the other hand, a circular sun and moon could be a big change in Minecraft, emblazened in the history of its development, like the introduction of smooth lighting and/or pistons. Plus it would make the world more realistic and believable.

I think that both square and circular suns and moons should be available (with a choice on the options menu perhaps? )