Here's the latest NSSL Hi-Res Reflectivity Radar overlayed on Google Earth. It shows a practically dry NO as a band of dry air got pulled into the vortex just as the eye passed NO to the East.
However, Gulfport, MS is directly in the worst part of the east eye wall right now and is getting hammered. Just as Mississippi is going to get hammered all the way throught he state as the projected storm paths show Katrina passing all the way from the bottom to the top of the state.
That graphic is misleading - the Slidell, LA radar has been knocked offline. That's why you aren't seeing the rain on the west side of the eye.
New Orleans hasn't dodged anything.
Much of that section looks dry because a radar is knocked down. The hurricane didn't just disappear.
More like the bullet missed NO's vital organs.
There is attenuation due to the fact that the radar cannot "see" through the heavy reflectivity along the north eyewall. I believe the some of the "gap" you are seeing on googles site is not real, but rather due to attenuation as radar sites to the north and east cannot accurately infer what is going on. The satellite imagery may be more reliable, given that all of the observing sites around NO are no longer reporting.
http://www.nhc.noaa.gov/text/refresh/MIATCPAT2+shtml/232359.shtml