I heard that travel permits are no longer required to travel from Mu-se to Lashio BUT I'm not sure if you still need a permit just to get across the border from China or from Myanmar to China. The permit required appears to have been relaxed only since last month. There is a source on the internet you can google and it will show that Mu-se and another town between Lashio and Mu-se are "free" areas now where no permit is required anymore.

Much of Kachin State is however still off limits, but overland access to/from China is really what's important for travellers I think.

I asked some Chinese travel agencies in Ruili about the overland crossing from Ruili to Mandalay. After getting in touch with Burmese travel agencies (it's better to contact these directly), the answer was that it's possible to cross overland, but you still need a special permit, which costs around 2000 rmb, and covers both ways, if you're coming back the same way. On top of that, you'll need to pay for transport costs - around 1000 rmb for a car from Muse to Mandalay, which can be shared between four people, and a guide; around 35 rmb a day.
The flight between Kunming and Mandalay would probably amount to similar costs, but off course the overland trip could provide some nice scenery on the way.

Update: I'm heading to the border tomorrow from within Myanmar, no permit is required anymore. I'm pretty sure crossing overland to China would also be possible without a permit provided you have a visa in your passport as the law changed in February, but I'm not sure. I will make an enquiry once I arrive at the border to see. Even if a permit is still required for the border crossing, a change in regulations to allow permit-free crossings should be imminent. At this time I have neither a need nor desire to cross into China at this crossing, but in the near future I might need to. Things are changing quickly in Myanmar - within months everything talked about on this forum could be completely different.

I am at Mu-se opposite Jiegao now. There is definately no longer a need for a permit to travel between Mu-se and Lashio as there was previously. The road is winding, featuring a number of switchbacks and very beautiful scenery along the way. Apart from the road and the local driving standards, there is absolutely nothing dangerous about the area hence it makes sense that the Myanmar government finally removed the permit requirement.

At Myanmar immigration I was told (as I understood it): for crossings from Jiegao, China to Mu-se, Myanmar with a Myanmar visa in your passport, no problem crossing and proceeding independently overland to Mandalay, Yangon even Myawaddy (opposite Mae Sot, Thailand) and exiting there. For Myanmar to China, can travel independently to the border armed with a permit to allow exit (exactly why this is required is beyond me...probably within months it will be stopped).

Side question I know, but can you then go from Myanmar into India?

Probably not yet - the crossing at Tamu/Moreh (India) seems like it might open soon, but unless you have special permission I'd say your best bet for overland exit (after entering from China) is crossing into Thailand at Myawaddy/Mae Sot, which has either just been allowed or is about to start. For crossings into India, give it another year or two and by then it will probably be allowed.

@Danmairen, btw I can confirm that right now Chinese nationals are not even allowed into Mu-se with a border pass, only a visa (Chinese government policy, not Myanmar policy). Locals from Ruili may be an exception to this as I have seen many 云N registered cars here. This may change after July 1st when it is expected that all Chinese nationals may be able to freely enter Mu-se with just a border pass.

For foreigners, it seems that overland crossings may be possible without a permit coming from China, but in the other direction a permit is still required to exit Myanmar but this requirement may soon be abolished. This is the way I understand things to be right now according to the officials I spoke to.

Any updates on the situation of border crossing now, is it still required to handle travel permit first to cross border ?

I'd be interested in updates too, can't find any solid info online how to go about doing this. Do I just need to go to the Myanmar embassy, get my visa, then good to go?

Starting in August (presumably tomorrow) three Thai-Myanmar border crossings will allow full overland access to all unrestricted parts of Myanmar. However, there was no mention of the China-Myanmar border also allowing unrestricted crossing privileges at this stage. To be honest, it seems bizarre that they are still holding off, given that the road from Muse to Mandalay is open and safe, although Lashio had some troubles back in May, a few weeks after I passed through.

Therefore, one should assume that the Jiegao-Muse crossing still requires a permit for the time being (possibly in both directions, despite what I've been told) until otherwise noted. However, if the opening of the THai-Myanmar crossings are anything to go by, then they should set a precedent for the China-Myanmar crossing to open in the next few months or year or so.