Software recommendation requested
Photomatix does a pretty decent job of aligning handheld bracket bursts, although I usually use the exposure fusion mode for more natural results.
Obviously IS and quick shutter speeds will help.
I have had good success with manually blending the two most extreme exposures with PS which is pretty easy and makes avoiding errors easier.
Another recomendation is PTGUI pro which is great, able to export your stitched HDR panorama in the layers for precise blending later or in your favourite blending programme.
90% of my extended dynamic range and stitching work is tripod based, but I am also interested in applying these techniques for handheld work - think travel photography with M43 or LX5 etc...