Considering what could have happened it's beginning to sound like they did get lucky. Still a lot we don't know -- and not all danger has passed. If the worst had happened we wouldn't be hearing any live reports out of New Orleans.
That is because:
1) It weakened from a Cat 5 to a weak Cat 4/high Cat 3. Since wind damage and storm surge is somewhat exponential to speed, that relatively small drop made a big difference.
2) It went slightly further east than the forecast, about 30+ miles east of the city. It appears that may have been just enough east to reduce the level of storm surge in Lake P. to prevent major overtopping of the levees. Still won't know for sure for a few more hours. However a big breach did occur in the smallest of the 3 bowls that the 3 separate levee systems create in the city, with water to the rooftops. Thankfully that hasn't happened (at least yet) in the much bigger central/western bowl, where downtown is.
IF the storm had kept up its max winds AND hit land to the west of where it did, none of these predictions were too far out of order.
Looking at Camille pics, and imagining that level of destruction in a MUCH more densely constructed area, not to mention one under sea level, and it isn't hard to see where they extrapolated that from.