A really cool algorithmic problem I've been obsessed with lately is stable sorting in O(n log n) time and O(1) extra space. It's possible (Trabb Pardo 1977, Katajainen and Pasanen, Huang and Langston, etc.) but all known algorithms are very complicated. As far as I understand now, there seems to be a "wall" at sqrt(n) extra space. If we have that much, it's not too hard to write a stable mergesort or quicksort with the right time complexity. But if we are restricted to O(1) or O(log n) space, the algorithms become much more involved, using a sqrt(n) buffer inside the array to encode information about the rest. There are working implementations on GitHub (GrailSort and WikiSort), both are over 500 lines.
Here's a couple innocent-looking special cases that are still surprisingly hard:
1) Given an array [a1, a2, ..., an, b1, b2, ..., bn], rearrange it into [a1, b1, a2, b2, ..., an, bn] using O(n) time and O(1) extra space.
2) Given an array of zeroes and ones, sort it stably using O(n) time and O(1) extra space.
I'd be very interested to hear about any advances in this area.