As I've said before, GMail can get conversation threads wrong when it inappropriately thinks that two messages are part of the same thread, but I had my first test of when it got it really right.
One of the mailing lists I'm on just got into a debate about Tillman and other war issues. At current count, the number of e-mails in the thread are 40, and likely to grow even further, but GMail is keeping them all nice and organized under one heading. I've previously had the 40 e-mail experience in both Yahoo! and threaded e-mail readers, and it's very easy to judge GMail as the winner. Other e-mail readers make it difficult to go back to what other people said without opening multiple windows and arranging them. GMail lets me view as many responses as I want in chronological order and keep others collapsed, all in the same window. It is also remarkably easy to read the thread as your are composing your response, as the composition window is inside of the thread.
Also, I initially selected "Reply" for one of my responses, but then decided halfway through that I really wanted "Reply All." GMail let me click on the Reply All button and added in the additional e-mail addresses without losing the text I had already written.