I have / had both the 06/07 model and the 08/09 model and here is what I felt is the difference:
06/07 ZX10R
Pros:
1. Looks: Personally I loved the looks as I had the 05 ZX6R and it was the basis for the 06/07 10R (looks wise). It came with limited edition Akrapovic exhausts which was a major selling point to get past those ugly stocks. (I still have mine as decoration in my living room after I left my 06/07 10R!!!). Some die hard 04/05 10R fans hated the "bulbous" 06/07 version - it wasn't aggressive enough and looked pudgy in the looks department. So it's a very personal thing. I had mine in titanium silver and absolutely loved it.
2. Comfort: By comparison it is a more comfy bike than the 04/05 and the 08/09. The 04/05 was criticised for being too stiff and uncomfy so they softned the 2nd gen up a bit.
3. Handling: Now this is a tricky one. My first one was stolen just after I broke it in, so I never got a chance to push it to its limits, but the second one I had got pushed real good at Brands Hatch and Nurburgring tracks. In both cases I had a bad case of chatter coming in hard into the turns. It would start with hard braking and later on would come on even at the onset of braking. I was never able to solve this problem as I was not very good with suspension settings at the time and sinse it only happened braking from speeds of 200kph+ into hard corners, no mechanic was ever able to recreat it to understand the problem properly. Other than that I found it a very good bike and very stable and constant mid corner, and accelerated beautifully out of the corners. Speed damper was enough for me to handle any wobbles as well. The chasis always felt solid and never showed any signs of over stress and never felt too stiff in the turns either.
4. Gearing: I prefered the gearing on the 2nd gen...second gear had more snap, torque and response to it.
5. Power: Always the strongest point of any gen 10R
6. Dials, speedo, bits and pieces, construction, etc.: Gorgeous speedo, best in the class IMO (maybe KTM RC8, or 1198S is better, maybe), juicy yoke, forks, suspension dials, swing arm etc. Very high quality construction. IMO a class above Rs, Gsxrs, and Blades!
Cons:
1. Braking: This may have been the cause of the chatter coming into the corners and sinse then I have not heard good things about the 2nd gen brakes. Brakes also faded markedly through a track day...from 2 finger braking to full ham handed braking by 2pm! Lost a lot of confidence.
2. Tires: Stock Dunlops are crap...wear down too quick, and feel a bit vague diving into turns for me.
08/09 ZX10R
Pros:
1. Looks: a return to 1st gen inspired looks pleased a lot of kwak lovers...not me...but eventually I came around to love it. I was upset titanium silver was gone as a colour option too, and hated the new exhuast with a crazy zeal!!! But I picked it up in black, got a stubby GP style M4 exhaust and a sexy undertail to cure that problem. It may involve a little spending depending on your taste. But the M4 is well priced!! Black also hid the slightly "cross eyed owl" look of the front head lights some complained of. In green its a bit more pronounced. But of of the things I loved over the previous gen was the sweet line from the swing arm up through the sexy beefy frame!
2. Handling: Felt amazing right out of the box, diving very well into the turns but a tad unsteady on hard hard braking. But once I had it set up to my weight (200lbs, up from the stock 145 lbs setup), It felt hard to turn if riding it softly but a huge inprovement when braking hard and turning under hard braking into a corner. Keep in mind I asked it to be set up for the track regardless of the feel on the street. That being said, the new setup also made the very bumpy roads in my town seem less harsh! It felt very rigid stock, but was improved greatly with the new set up, though I also didnt mind it too much before. But now I just have to be more bossy with it when I'm coming into a turn...if I go in to softly it tends to run wide. Anyways this can all be adjusted. Handling is improved from previous version and I get a lot of feedback from the back end when I get a bit of tire spin up...I also know whats happening back there. Front feels solid all the time. The ride is noticebly less comfy though! It feels more aggressive and chizzled compared to the 2nd gen. I took the 2nd gen to Venice from London with the wife on the back (stopping every hour to shake out the numb hands and feet). I'm not sure I could do the same with this one. The seat for one is quite rigid, but I think the pillion seat is a tad better. Riding position is also more race orientated...higher foot pegs I feel.
3. Brakes are much much improved! I haven't experienced anywhere near as much fading. I even noticed fading on the 2nd gen on long commutes in the city on hot days (30C+). Don't notice that anymore! Plently of stopping power...I feel better than my buddy's 1198s Brembos IMO.
4. Finish and parts: Amazing parts, speedo, suspension settings, yoke etc. Amazing finish and attention to detail as previous versions...again best in class.
5. Power: again, it's what kwak lovers have come to love and the others make excuses for not having (ahem cross plank, ahem 200 extra cc and S spec upgrades- ahem 1198S). Smooth delivery, smooth power...no torque spikes or boggy patches in the powerband. Drives sensibly under 5000rpm (tame), and fierce over 6000rpm. Almost like 2 bikes, depending on my mood I ride as I wish. If you keep it under 6000rpm with short shifts the smooth clutch helps you battle traffic jams with little fatique or grief and keep fuel consumption down. The choice is yours. This was true for the 2nd gen also by the way.
6. Uniqueness: around these parts (Toronto) more Blades, R1s, old Gsxrs and DUKES!!! on the road than 10Rs. Makes me feel like a connoisseur, not a pose jockey!
7. Price: Extreeeeeeeeeeeme value for money!!!
8. Tires: Stock Perelli corsa 3s are my fav!!! no need to dump money on new tires right out of the box!
Cons:
1. Gearing: I don't like the weaker feel of 2nd gear compared to the previous gen. But a clutch blip can solve this easily.
2. Aerodynamics are slightly, slightly less as effective of the previous bulbous styling. Mostly felt on the chest and shoulders...not legs.
All around the latest gen is better though I have a deep deep fondness for the 2nd gen. Once you have ridden the 3rd gen you will notice the difference and most likely styling will be your biggest issue. But that being said, you shouldnt find anything lacking with the 2nd gen, unless you hit that problem with the brakes I mentioned...which I am uncertain if that was noticed by all 2nd gen riders.
I have had a chance to ride all its competition and for the price it is theeeeee best by far. If equally priced with the rest I would say it is up to riding and aesthetics preference. IMO if it were priced the same as the rest I would get the 3rd gen 10R hands down! If the 1198s were also priced the same I might even take the 10R over that, cause well if the Duke were priced the same it would lose its "Ferrari" status and just be a fiddly, difficult, uncomfy, under powered, and common V-twin with a little torquey fun factor but not much else. If I could get an 1198S on some secret "only for me special price, the same as the rest" then only this could sway me away from the 10R on sheer sex and poser value alone...though deep down I would prefer the ride of the 10R better!