Does JPA support managed associations like EJB 2.1 Entities or is scaffolding code still necessary? I cannot find anything explicit in the specification.

If I understood you right, no, it doesn't.
It means you should "synchronize" direct and inverse sides of bidirectional association in your code. Just direct side of association (annotated without "mappedBy") would be stored to database. But other aspects of managed relationships are supported: storing collection changes when element is removed, replaced or added, cascading of operations to dependant entities etc.

Just to be clear... what you're saying is when adding a Bid into an Item, the following code is still required to manage the bidirectionality (where as EJB 2.1 would have updated the reference to item automatically)?

Yes, exactly.