Larrabee is dead, in the water if not the actual project. Intels entire mentality and approach will NEVER triumph in the gaming GPU market even if they make a superb piece of hardware (which knowing intel they will in the end as the core 2 duo line, etc. bares testament).
You could not be more wrong, or hilarious.
The reason Intel failed, is the SAME reason Nvidia had such problems with Fermi, to big a die with too many "large" cores.
Larabee is without question not dead, you'd infact have to be rather silly to suggest it.
Lets see, AMD is taking GPU's on die, and eventually sucking in the low end FOR CERTAIN and probably the low mid end and possibly the mid end also in years to come. Intel are doing this, with completely uncompetitive, ill featured and massively slower GPU's.
Intel have more money than Nvidia could ever hope to have, they have deeper pockets and higher revenue than most other companies in the world.
Worst comes to worst and they simply buy their way through all the problems and absorb multiple companies and they have the pockets for that, it won't come to that.
As has been suggested, lots of people have rumoured the latest Larabee is pretty damn competitive to a 4870, yes its late, its very late. But AMD/Nvidia have been in the game for MUCH longer and take years to get something from first thought to final vision.
Unlike when AMD/Nvidia started you can't just make any old 1 pipeline card and sell a few, and unlike when AMD/Nvidia started when it cost very little and turn around was uber quick and you could launch a crap product(as both did, more than once) and just bring out something new very quickly, thats just not the case now.
Larabee was always going to go through a few internal revisions and lets be honest, it hoped to have something to show by now but AMD and Nvidia would have slipped a few generations, the way the industry is now, before releasing something useful.
The difference is, Intel have more than enough cash to through away on this pet project till it gets on top of production.
You're also mistaking what they are trying to do with Larabee, they are trying to compete with what will eventually be on core massive GPU acceleration rather than make a brilliant GPU, but as the industry moves towards gpu's on die, the gaming industry WILL adapt to the way Intel and AMD are going.
Larabee's got some growing up to do and some expanding in numbers of cores. Larabee has far more of a future than Nvidia does in gaming GPU's.