From the interviews I've read with POWER and PPC970 engineers, it's clear that the current PPC was rushed to market, leaving off certain features -- they didn't even manage to get the most modern vector processing unit in the chip in time. And the 970FX was just a power-saving version of the original 970.
So I don't think they'd bring an LPAR-capable PPC970 to market, adding that much technology to the chip, without bringing the memory controller back on board, which was technology in the original chip it was derived from in the first place. It'll be a really stupid move if they do.
I agree with the rushed to market part, but IBM will have to decide how they are going to manage the differentiation of their Power series and PPC series processors.
Whether people like to admit it or not, the current AMD64 core architecture is very good. It is both remarkably efficient clock-for-clock and has memory performance that no one can touch without prices getting into the stratosphere -- a real class act. And by all accounts, the core was designed to scale very well.
AMD is in an interesting position because they have access to all of IBM's fab process technology (by longstanding agreement), and a core that is every bit as good as IBM's. It is worth pointing out that the AMD64 core was not built internally from whole cloth; there is a lot of next-generation Cray and DEC Alpha inside AMD64. They took what was fundamentally an excellent core design (acquired from NexGen way, way back), purchased next-generation interconnect and processor technology from Cray and the Alpha processors, and built a new architecture from the ground up, integrating a bunch of extremely high-end features into an already very efficient basic core.
Intel is the one screwed here, actually. IBM and Apple have licensed many of the CPU design technologies AMD uses, probably in exchange for access to IBM's state-of-the-art fab technology. Intel is left a little bit out in the cold here, technology-wise, and while they are huge they are also having a hard time keeping up and market share is slipping. But for IBM to remain competitive with the aggressive roadmap of AMD, they really need to drop the pretense of having a separate high-end processor line with all the feature goodies that AMD will sell you for a couple hundred bucks in their mass market product lines. Hobbling the PPC line will eventually catch up to them in the market, because there is no price differentiation on the low-end.