Ah, yes it does but only when using audio playback.
When using the slide show for playback, or when playing a video, the play button still shows as play rather than a paus button. It does not alternate during playback.
It is probably just a minor glitch.
BTW my system is: ASUS P5k-WS,QX6700,4 gig ram,BFG 8600GTS OC,1 Raptor 150, 2 500Gig WD NCQ in Raid 1, Vista Ultimate 64bit.