Best practice for future of imagefield in D7?

I personally don't think the file entity will help (directly) with inline images in any way. In order to do inline images properly you need a combination of good WYSIWYG integration and an input/output filter to handle dynamically replacing some placeholder tag with the image (and all its attributes). Media module is making some strides in this direction, but I'm not sure if it actually has the all-in-one sort of functionality people are wanting for inline image handling. Really I don't think inline image handling and file entity have *too* much to do with each other, so I'm not really sure what kind of thing to recommend here.

my impression was that this file entity capability would bring some type of UUID to files that would help make that useful for inline purposes.

Every file in Drupal already has a suitable ID (in this case it's the FID of the "managed_file" table), though it's not "universal" as UUID would imply. In any case, files have had unique identifiers for some time (even in D6).

And of course the file entity solves the description field issue that I have never quite understood.

Yes it's likely that File Entity will finally solve the problem of various meta-data being attached to an image. This might include things like a copyright, photographer name, media source, etc. that are *always* true of an image, no matter where it is used. This could be useful for inline purposes.

The biggest issue with inline images is working between the WYSIWYG and the final HTML output. End-users would like to be able to insert an image into a post and have it automatically pull in global meta-data while still being able to provide a custom caption that is not global. In this way, I think that file entity will provide a useful capability for filling in the common information. I do not think it will actually help in handling WYSIWYG integration and filtering on output, which is the most important missing piece in the inline image handling world.

It is interesting that it seems you don't see much of a collision between imagefield and media module though.

I believe that Media module be able to provide a superior experience for a universal media solution. Image module in D7 will still be an excellent solution for image galleries or feature images, or for anyone who doesn't want to commit to a behemoth solution that takes a half-dozen modules and multiple dependencies to upload an image. Media module provide a great experience but at the cost of whole-sale commitment. Other approaches are a bit more iterative, such as my own efforts in Insert or FileField Sources.

With the advent of File Entity, I'm mostly excited that it provides a more iterative introduction into improving the file handling of Drupal without investing in Media's entire approach and massive code-base. File entity is also extremely likely to be integrated into Drupal core, whereas Media module... well I'm not certain at this point. Obviously there's still room to improve file handling in core, but I'm not sure Media module will be it.