Yes, Java in general performs much better on Java 1.6. However, there is the caveat that JMEDesktop has some issues with 1.6 that still have not been resolved.
I'm wondering if the nightly build is 1.6 compatible ? Any problems?
I was referring to the nightly build. I'm running directly from CVS and on JDK 1.6 with only the JMEDesktop problems and that has to do with Popup support (for like combo boxes and such).
Not sure if im talking rubbish right now, but what about other features? Do they compile and run under 1.6? And are they faster if they run? 
…as previously stated jME runs with JDK 1.6 just fine (apart from afore mentioned problem) and yes it does run games faster.