Physics is less of a deal here when looking at the big picture. This merger shouldn't really affect ATi's physics ambitions.
As for alot of Intel and nVidia talk these days.. it won't happen.. atleast not for a long time. Intel has no real business incentives to shell out big bucks for nVidia and as long as nVidia's Jen-Hsun remains chief-executive, he won't allow an acquisition of his company unless he becomes the top-brass of the new merged company.
As long as this whole mess doesn't affect the R600 release date, it doesn't remain a huge short-term issue for me personally.
Edit: Another rumour I heard today: nVidia wants to get into the CPU market.