When Sport Pilot became official September 2004 the FAA included a bunch of transition deadlines for pilots and aircraft that had been flying as ultralights but now had to transition to Sport Pilot/Light Sport Aircraft (SP/LSA) if they wanted to keep flying.
For example, if you wanted to continue flying your fat ultralight (any ultralight that did not meet Part 103 requirements) then you needed to meet the FAA guidelines for registering your aircraft as an Experimental Light Sport Aircraft (ELSA). Failing to meet those deadlines grounded your aircraft (at least as far as the US was concerned) forever. The final deadline for transitioning a fat ultralight to ELSA was January 31, 2010. If you didn't make that deadline then your aircraft can never legally fly again in the US.
There were also a number of pilot transition deadlines that allowed ultralight pilots to get varying degrees of credit for the flying and ratings they had earned as ultralight pilots. For example, if you were a registered ultralight pilot (registered with one of the four organizations that registered pilots in those days), and you took your practical test before January 31, 2008, you could go straight to an examiner without a recommending instructor's endorsement and all of your ultralight flying time counted towards your certificate.
Now we are approaching the final transition deadline -- January 31, 2012. Up until now you could count your ultralight time towards your Sport Pilot rating. But that ends at the stroke of midnight on January 31, 2012. After that date, if you have logged ultralight hours, those hours will not count toward your Sport Pilot requirements. If you fall into this category and are planning to get your Sport Pilot certificate you should do all that you can to beat this deadline. Get in touch with one of the weight-shift examiners (which includes us) and find out what you have to do to complete the practical before the end of January to get credit for your ultralight flying.
Personally, I think the decision on the part of the FAA to stop counting ultralight hours is a real shame. Flying is flying, but the FAA disagrees. Unfortunately, this battle has been fought and lost and once again, the bureaucracy won.