Does anyone know if gen=1 in bitcoin.conf works in 0.5 on testnet? It doesn't seem to do anything as far as I can tell. What I want to do is generate a block so my test transactions get included in the block chain. 
Yes, it aught to work (for bitcoind, at least-- I haven't tested with bitcoin-qt). getinfo will tell you if it is working (look at "hashespersec").You might want to run a testnet-in-a-box, it is 60 time easier to generate blocks on it:
https://sourceforge.net/projects/bitcoin/files/Bitcoin/testnet-in-a-box/