Yes, it works under 3.2.
The most likely problem is some version skewage with other plugins already installed.
I suggest you try installing it on a "clean" copy of Eclipse that you've just installed, without other plugins.
If that works, you should start checking plugin versions between the two Eclipse installs.
The Eclipse install worked for me with a lot of other commonly-used plugins installed. I used the starter kit.
I'm using Eclipse 3.2.1 and jBPM Designer 3.0.9 - it does install but in order to use it you have to associate .xml with the JBoss jBPM Graphical Designer. This step wasn't obvious until I read some of the helpful comments in this forum.
Go to Windows -> Preferences -> General -> Editor -> File Associations and add an Associated Editor to the *.xml extension (I had to add *.xml as an extension).
Hope this helps.
@Damian: This is only the case if you install some other plugins afterwards that 'hijack' the .xml extension. adding *.gpd.xml or processdefinition.xml
It's possible, although I can't think what plugin that would be. I had to add xml to the extensions so nothing had hijacked it that I could see (unless there is a way of hijacking that doesn't involve adding something as the default associated editor).