I love South of Nowhere too, and have been hoping and praying for a DVD release. I think the show would do well on DVD, because while it's popular with teens, it also has a devoted 20- and 30-something lesbian following (myself included), because it's the only show on right now besides The L Word with lesbian main characters. And that following is very loyal and buys lots and lots of DVDs (hear me, The N? ).
The Season 2 premiere date is Friday, September 29, after the Degrassi: TNG premiere, on The N. And, in case you didn't already know, Season 1 is available on iTunes.