Personally, I've worked on some of the software that runs in the device used by BusRadio. It's an example of an embedded project built on Twisted and Python. The device is an embedded XScale processor running a debian-derived distribution, so it might not meet certain definitions of "embedded", but it is pretty dang small: it fits into the dashboard of a school bus.
There were some interesting issues with using Python with large libraries - the interpreter can take quite a while to start up and load all the code for Twisted on a really slow chip, and some things needed special-case optimizations. However, at no point was the dynamic nature of Python a problem. The software in question certainly wasn't perfect, but at least when using Twisted, a simple programming error will not "bring the whole application down". A traceback will get logged, and processing continues.
So, if you're in an embedded environment sufficiently unconstrained that you can use Python in the first place, it's no different than developing "regular" programs (games, desktop applications, web apps). You don't need static typing there, and you don't need it here either.