Two prominent groups that are working on it are Andrew Zisserman's group at Oxford: www.robots.ox.ac.uk/~vgg/publications/2012/parkhi12a/parkhi12a.pdf
And Peter Belhumeur's group at Columbia University, who'll be presenting a new paper on detecting and recognizing dog breeds at the European Conference on Computer Vision (ECCV) in 2 weeks. [Peter was my PhD advisor]
More generally, many people in computer vision are getting excited about "fine-grained visual categorization," which is about classifying things at roughly the "species" level. This is in contrast to a lot of the previous computer vision literature, which either focused on generic categories (e.g., people vs animal vs car vs rocket-propelled-grenade) or specific object/instance recognition (e.g., face recognition).