The original aim of the "system compositor protocol" was to have an interface for compositors where all they do is nothing but showing other compositors or full-screen interfaces. This is still in effect the case but rather than being called a "system compositor" protocol it will just be the fullscreen shell protocol. The protocol was renamed since there have been some different views over Wayland as a system compositor itself.
In the latest patches by Jason Ekstrand, there's the Wayland protocol support along with an implementation of the proposed "wl_fullscreen_shell" as a Weston shell plug-in, and simple-shm modifications to make it a simple full-screen shell client. Still to be coded are Wayland back-end support implementations for the fullscreen shell.
This latest protocol work can be found on the wayland-devel mailing list.