Ok, heres the final permanent requirements.I did some research and here is a direct screenshot from the US State Department regarding passport processing time.
Also, in regards to passport requirements for travel, here is the most current information.
October 1, 2007 - The departments of State and Homeland Security reestablished the valid passport requirements for air travel. Valid passports are required for air travel to / from Canada, Mexico, the Caribbean, and Bermuda.
As early as Summer 2008 - A valid passport will be required for all sea and air travel. And subject to U.S. Government amendment, U.S. and Canadian citizens 15 or younger with their parents consent may cross the U.S./Canadian border by land or sea with a certified copy of their birth certificate.
So at this time there is no defined date for mandatory passport use for sea travel, only for air travel. Its also possible that when mandatory passoport use goes into effect, that children under 15 may be exempt from the requirement. It is reccomended that you go ahead and apply and recieve your passport because when they're mandatory there will be a major rush for everyone to get one and the time it takes to get one may increase drastically.