This is a train wreck.
It is a no win situation. If NO gets nailed, it will be catastrophic. If it lands east or west, it will also be catastrophic, because all the media coverage (and models) are focused on NO.
Damn. I was stationed in New Orleans for two years and we got brushed by a couple of hurricanes, but nothing like this. We had massive flooding just getting sideswiped by one; I can't imagine the damage a direct hit would do.
I still have friends there. I hope they have sense enough to get out of town.
My fear is that if Katrina directly strikes New Orleans and Lake Pontchartrain overflows into the city, the damage could reach as high as US$100 billion. 
And who knows how much damage it will cause to the numerous petroleum facilities along the Louisiana coast.