Woah iGEM seems to be getting a lot of attention! This is good I think, synthetic biology is an important new field of engineering and science. In many ways I feel like the "old" AI days, the whole philosophy of "if you want to understand it, you'll have to build it" is very similar. Personally I was part of the University of Groningen team (www.igemgroningen.com) which aimed to create a hydrophobic (water repelling) biofilm coating, it could've had lots of applications if it worked but like most iGEM teams it wasn't all that successful. One of my primary objections to this project while watching the presentation is that you'll still have to sequence the genome
... a costly and time consuming activity, also the compression was a good thought but large sequences of nucleotides will inevitably start coding for RNA which could lead to a whole range of interference, unwanted proteins being the obvious one. Moreover you'll have entire colonies (millions of cells) with the same data, and little to no control between the individual differences.
While I do believe in the future of organic systems as a means for data processing and storage I don't believe that treating them as digital circuits is the right way to go.