Simply put, the idea works as follows: Use a Block Dispenser to place wood in front of a saw. the results are collected and then fed into a turn-table mounted Dispenser, which is setup to rotate and spit out it's contents between two directions. One direction is a stream of water leading to a hopper connected to a chest for storage, the other stream leads to a hopper feeding into another block dispenser, starting the entire process again.
I've not got any video recording software/nor editing software, so rather than worry about a video demonstrating it, i'll instead simply furnish you guys with a link to the save file where I've built this machine - http://www.mediafire.com/?qonk60th5kovk95
Edit:
Okay, here's the fully completed version in all it's glory. It's not quite perfect - the sorting is slightly uneven, and sometimes a few blocks get shot into odd places, but in general? it werks! and if i do say so myself, it works very well. The resource requirements for a legitimate world are probably a little hideous however, given the 5 block dispensers, 10 turn tables, 5 saws, and god knows how many gearboxes, axels and the ilk. Oh, and the gigantic scar you'll need to tear in the earth to make it. But hey! you'll find plenty of iron and coal, right?
![Image](http://img825.imageshack.us/img825/5493/20110727000143.png)
![Image](http://img69.imageshack.us/img69/2079/20110727000031.png)
![Image](http://img838.imageshack.us/img838/4286/20110727000036.png)
![Image](http://img217.imageshack.us/img217/524/20110727000052.png)
Oh and, uh, one final piece of advice: be really careful you dont manage to drop a non-saw-able block into the machine. the results are... really annoying, shall we go with that?