The gem-encrustation epidemic has infected everything in the dungeon that I could see... except for one sad, lonely plain ole 'lich'. Poor 'lich'.
The encrusted Poison Elementals are pretty nasty, but not as bad as I was thinking. They still have Lethal poison on touch, mock-teleport speed and big spells. Their Flamestrikes don't have the damage potential of the Liches. They seem to have a bit more mana to work with, and there appears to be an additional Poison spawning, and perhaps another Lich or two in places here and there. The loot of the Poisons remains the same save an extra gem or w/e.
Next I went over the entire fourth floor. The Fire eles are all infected, and still hanging around fire river with their Lich handler patrolling the secret halls as usual. They appear to be slightly stronger, with the same abilities and loot as before plus a gem or two.
The Lich Lord room was pretty interesting again, with some changes made very recently. The encrusted lesser Liches and Lords in this room only are now carrying an additional little pile of gold and 4 more gems. This achieves a couple of things quite nicely - it now makes the lesser liches something besides lure-away fodder. Farming all of them and the Lord is extremely dangerous but gets a nice pile of coin up quickly. The additional stack also makes it a little more difficult for thieves and scrubs to wipe out a corpse box in one swipe, and the other liches don't loot it up as quickly either. But most importantly, looking at two piles of gold in a corpse box is twice as fun as seeing one. The amount added was perfectly tuned. It's not so much it's welfare, but it is now too much to ignore.
I worked the room quite a lot today and the most traffic was this morning. Red and blue PK's were recalling in from time to time, tryin to catch me farming dirty. I also ran into something I haven't seen in forever - the dungeon thief! I had the pleasure of having my Purse Pickled and Filched, but they went away after a few close calls. The level 4 dungeon chest in the room adds an interesting dynamic as well. Pickers will recall in from time to time right in the middle of a giant shit-storm of crazy lich Flamestrikes and reds chasing people all over the place.
So all in all it can be a really fun, dynamic place. I can't think of a more dangerous room in the game. You have expert level challenges from both the PvE and PvP front, and the rewards are now very nicely balanced against the risks. It is not new player friendly, but that is clearly by design. See everyone in-game.
Thanks again devs for your work, great job imo

PS ... there was no sign of the entity Boomland cryptically refered to in his previous post. But I'm looking forward to finding it and killing it. I'll post the details and some screen-shots when I track it down.