Well, I said I'd reply back with my results. I replaced a Matrox G400 with the LE and am also running a V3 2000 PCI to drive my second monitor.
2D: With light use, I've noticed 2D image is very good, almost indistinguishable from the G400 at 1280 res. The colors seem artificially vibrant to me, but I'm getting used to it and it doesn't affect work. There are little video glitches in CorelDraw 9 every now and then, nothing a screen refresh won't take care of. I've only spent a little time in AutoCAD R14, Pagemaker and Photoshop. Everything seems fine and it doesn't look like I've given up much in 2D, if anything, with the swap. The extended desktop works fine with the V3 in 2D.
3D: I'm trying to work out small problems one by one until I can get to the same point I was at with the G400. I have to admit, it took some playing around with the G400, and it's the same with the LE. I'm using 7089's (also tried 7041's) and am also using the Rage3d tweak. The card seems to run fine at 183/183 although I haven't really hammered on it. I have a 486 fan mounted on the HS.
I haven't been able to get 3dMark2k1 to run. I had to reinstall Q3, but now it runs fine. UT also runs fine in D3d. Images in 32bit games is very nice, again, as good as G400 IMO. The G400 had some issues with UT and they're all gone with the Radeon. The only 16 bit game I've tried is Motocross Madness 2 and the Radeon looks inferior to the Matrox by a big margin. In fact, it looks worse than many other vid cards I've seen/used including V3, Geforce MX, TNT Ultra. The G400 made this game look absolutely gorgeous, those days are gone if I keep the LE.
Conclusion: I'm going to continue testing but it looks like I'll keep the LE as long as there are no major 2D flaws. There doesn't seem to be any compromise in 2D and the LE has increased framerates drastically in the games I play.