Some good news from NOAA, which is that Gustav stayed significantly west of New Orleans and that it weakened to a category 2 hurricane. This still means that anything and anyone in the area is going to get battered, but that the work done over the last three years may be sufficient to hold back the worst.
The map to look at is the storm surge map because that shows where the waves of water the storm generates are most likely to hit. See all that dark purple? That is where the worst damage will be. If I'm looking at the map correctly, the delta and mouth of the Mississippi River and then up the river to New Orleans will be most severely affected. It was the storm surge more than the wind that caused the horrific damage after Katrina. The biggest worry I have seen in the news reports was that, because Gustav was passing closely to the west of NOLA, the storm surge was going to come up the Mississippi and hit the river levees and flood walls which are not as high as those near Lake Pontchartrain, possibly damaging them. It would also put flooding into the higher elevations ofthe city (higher being a very relative term) that had escaped the flooding last time. We won't know this for hours, maybe even not until tomorrow.
So, Gustav has hit and hit hard, but not as badly as it might have, which is a very good thing. It is going to do nasty things to southern Louisiana, but hopefully enough people got out of the way and the levees have been reinforced enough that the damage will be contained. Finally, let's hope that power and services are restored quickly so people can return to their homes within the next few days.
Update: Good reporting in the NYT. Avoids the breathlessness of CNN and actually has some details of what is happening in New Orleans.