I saw the construction when I was there this summer Katy, and everyone is REALLY excited for the subs. The monorails weren't working to full capacity because of the construction on the lagoon, they had to take out part of the monorail track to fix it.
Apparently it's going to follow a similar path as the 20,000 leagues ride did, but go through the under sea adventure of nemo and his friends. From all the concept art I've seen adn what I've heard about it, I am impressed! Since it was my first trip to Disneyland this May, I definitely plan to go back, probably not in 2007 but hopefully if I can afford it in 2008 (hopefully Disney will give their CMS a good discount to go!).
Basically it will be similar to the 20,000 leagues ride if you have ever been on that. They decided to put it in Disneyland but take out WDW's lagoon to make the park more different. Also the upkeep of 20,000 was insanely expensive which is why it closed in the first place. Hopefully they have new technology so it won't be as expensive.
I think i may have some construction photos somewhere. If I find them I'll post them here. :-)