Just wanted to know if it is 'safe' to use non-square (but still power of two) textures these days. (ie 256x1024)
Or are there any compatibility issues to watch for - I aim for GF4Ti class or higher.
Non square is absolutely ok. The reason some sites discourage it is because the non square texture is still mapped to texture coordinates 0.0 .. 1.0 in x and y direction, and that confuses some people. But if you need less resolution in one of the coordinates it's perfectly ok.