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Reports are coming out that the iOS 5 beta works just fine on the 3GS, which is a relief since just a couple of weeks ago it was rumored that the 3GS wouldn't work at all.



From MacRumors:
According to Apple (emphasis added):

iOS 5 will be available as a free software update for iPhone 4, iPhone 3GS, iPad 2, iPad, iPod touch (fourth generation) and iPod touch (third generation) this fall. Some features may not be available on all products.

Unfortunately, Apple doesn't spell out what, exactly, won't work on the slower iPhone 3GS and third generation iPod touch. But some research from 9to5Mac and Banolka on YouTube gives us some ideas, at least in the beta.
  iOS 5 Works Just Fine On iPhone 3GS