Several recent articles with evidence that humans and Neanderthals did interbreed. But, only those homo sapiens that migrated out of Africa interbred:
http://www.freerepublic.com/tag/neanderthal/index?tab=articles
"Humans love to mate. They mate all the time, by night and by day, through all the phases of the females reproductive cycle. Given the opportunity, humans throughout the world will mate with any other human. The barriers between races and cultures, so cruelly evident in other respects, melt away when sex is at stake. Cortés began the systematic annihilation of the Aztec people--but that did not stop him from taking an Aztec princess for his wife. Blacks have been treated with contempt by whites in America since they were first forced into slavery, but some 20 percent of the genes in a typical African American are white. Consider James Cooks voyages in the Pacific in the eighteenth century. Cooks men would come to some distant land, and lining the shore were all these very bizarre-looking human beings with spears, long jaws, browridges, archeologist Clive Gamble of Southampton University in England told me. God, how odd it must have seemed to them. But that didnt stop the Cook crew from making a lot of little Cooklets.
Project this universal human behavior back into the Middle Paleolithic. When Neanderthals and modern humans came into contact in the Levant, they would have interbred, no matter how strange they might initially have seemed to each other. If their cohabitation stretched over tens of thousands of years, the fossils should show a convergence through time toward a single morphological pattern, or at least some swapping of traits back and forth.
But the evidence just isnt there, not if the TL and ESR dates are correct. Instead the Neanderthals stay staunchly themselves. In fact, according to some recent ESR dates, the least Neanderthalish among them is also the oldest. The full Neanderthal pattern is carved deep at the Kebara cave, around 60,000 years ago. The moderns, meanwhile, arrive very early at Qafzeh and Skhul and never lose their modern aspect. Certainly, it is possible that at any moment new fossils will be revealed that conclusively demonstrate the emergence of a Neandermod lineage. From the evidence in hand, however, the most likely conclusion is that Neanderthals and modern humans were not interbreeding in the Levant.
Of course, to interbreed, you first have to meet. Some researchers have contended that the coexistence on the slopes of Mount Carmel for tens of thousands of years is merely an illusion created by the poor archeological record. If moderns and Neanderthals were physically isolated from each other, then there is nothing mysterious about their failure to interbreed. The most obvious form of isolation is geographic. But imagine an isolation in time as well. The climate of the Levant fluctuated throughout the Middle Paleolithic--now warm and dry, now cold and wet. Perhaps modern humans migrated up into the region from Africa during the warm periods, when the climate was better suited to their lighter, taller, warm-adapted physiques. Neanderthals, on the other hand, might have arrived in the Levant only when advancing glaciers cooled their European range more than even their cold-adapted physiques could stand. Then the two did not so much cohabit as time-share the same pocket of landscape between their separate continental ranges.
While the solution is intriguing, there are problems with it. Hominids are remarkably adaptable creatures. Even the ancient Homo erectus- -who lacked the large brain, hafted spear points, and other cultural accoutrements of its descendants--managed to thrive in a range of regions and under diverse climatic conditions. And while hominids adapt quickly, glaciers move very, very slowly, coming and going. Even if one or the other kind of human gained sole possession of the Levant during climatic extremes, what about all those millennia that were neither the hottest nor the coldest? There must have been long stretches of time--perhaps enduring as long as the whole of recorded human history--when the Levant climate was perfectly suited to both Neanderthals and modern humans. What part do these in-between periods play in the time-sharing scenario? It doesnt make sense that one human population should politely vacate Mount Carmel just before the other moved in.
If these humans were isolated in neither space nor time but were truly contemporaneous, then how on earth did they fail to mate? Only one solution to the mystery is left. Neanderthals and moderns did not interbreed in the Levant because they could not. They were reproductively incompatible, separate species--equally human, perhaps, but biologically distinct. "