The code reorg I mentioned in the last development update is now pretty much complete: the editor has been relegated to a sub-module, and work on the combat mode is underway. Right now, you can spawn two ships who will shoot at one another, doing damage, but the damage has no effect yet.
Since the last installment, I've been mostly concentrating on improving the editor and the ship visuals, including windows, an outside view mode for editing armour, and even smoke.