I've not tried it yet, but apparently CS5 will allow you to save a JPEG from a 16-bit file - it just goes ahead and converts it to 8-bit while it does that.
I do all my editing in 16 bit, I never change to 8 bit, except when I want to save the final jpg, after all my PPing is finished
Exactly. Unless you're drastically short on memory, processor speed and storage space, leave it as 16-bit.