Free movement is already possible, without any passport restrictions, across the whole of the EU (plus Swizerland, Norway and Iceland) under the Schengen Agreement. The only exceptions are as follows:
Bulgaria & Cyprus have committed to fully implementing the provisions of the Agreement, but have not yet set dates for doing so.
Romania is due to fully implement the provisions from March 2011.
The United Kingdom is the only EU state which has refused to fully implement the provisions of the Agreement.
Ireland wishes to fully implement those provisions, but is currently barred from doing so because of the existing 'open border' policy with the UK
The British government cites 'national security' as the reason why the UK is not a full Schengen member. (That's despite the fact that countries like Spain, who've also suffered terrorist attacks, are happy to be part of the 'borderless' area). The probable real reason is that our politicians are scared of the reaction of our xenophobic media (e.g. the dreaded Daily Mail) if they open up our borders.
UK citizens do not need a passport to travel to Ireland. (People go to and from work, and on shopping trips etc, every day across the Irish land border, without any passport formalities). However international airline security rules require that all airlines must check the ID of their passengers. Some airlines (e.g. easyJet) will accept a wide range of forms of ID, including things like bus passes. Others are stricter but currently all airlines accept a photographic driving licence as ID for travel between the UK and Ireland. (However Ryanair has decided to switch to a 'passports only' policy from later this year).
Chris