We've just applied as a mentoring organization for the Google Summer of Code 2011. Here a couple of project ideas students could pick from / expand upon. Feel free to suggest more in comments.
Whether we're accepted or not will be known by March 18th.

Most projects will require a decent knowledge of Java and various libraries. Necessary Magnolia introduction/training can be provided by the mentor.

In no particular order:

Infrastructure integration with our "Store"

Our recently born forge is a one-stop shop for developers, where they can develop/host their modules. Our "store" (integrated in the Magnolia AdminCentral, but also visible at http://store.magnolia-cms.com) is currently manually maintained; we'd love for modules to be automatically published in the store.

This project could require a good understanding of Maven and its various subsystems. (We've been thinking about using our Maven repository as the source of information for all things showing up in the store, rather than human input)

Other ideas in that area include improvements on the "client side" of the store, allowing Magnolia instances to download modules directly from the store.

Module downloader updater

Our current module mechanism relies on discovering modules (Magnolia plug-ins, i.e jar or zip files) on the classpath. We'd like to be able to host those outside the web application, and be able to download, install and start them without having to restart the container. This might or might not include OSGi.

It is also related to the store project described above.

See Concept Module downloader updater for some more notes and ideas.

Standalone bundles

To improve the discovering user's experience, we'd like to have "double-click"-able artifacts.

Some more details and ideas at Concept Standalone bundles.

OAuth integration

We have an experimental OpenId module, allowing users to login to a Magnolia instance using their OpenId/Google/Yahoo credentials.

We'd like to same the same thing happen for OAuth ("login with your twitter/facebook account"), and potentially consolidate those 2 in a single module.

This project would perhaps also be an open door for improving our whole login infrastructure. (Replacing an ugly jaas-based infrastructure; JSecurity is in the radar, for instance)

OpenSocial and OAuth integration

We currently have an OpenSocial integration module, allowing OpenSocial gadgets to be embedded in Magnolia pages. (see Magnolia OpenSocial Container). It's currently lacking oauth integration, which would allow "protected" gadgets to be embedded. As a typical use-case, we'd like to embed Jira gadgets, showing results relevant to the user looking at the Magnolia page.

Your ideas !

There are plethoras of potential module ideas out there, we're sure you could come up with something we haven't thought of writing down here.