BBCnews is carrying this report summarizing new genetic findings by an Italian group about Neandertals. In a nutshell: while modern man and Cro-Magnon man (a form of early-modern human, ~35,000 years before present (ybp)) show a very strong relation, Neandertals show little if none.

Some notes: while significant, this is not a complete refutation of the interbreeding hypothesis. Usually sequence comparison is done over a narrow selection of the genome instead of the entire thing, so it's possible there are more correlations somewhere else on the DNA tree. Also, the two samples they used were from Europe, where it's widely considered little if any interbreeding took place.

Neandertals ranged widely, as far south as the Levant (Israel-Lebanon-Syria). Archeologically (trash and old tools) and paleontologically (bones), there is evidence that modern humans's interaction with Neandertal varied considerably according to the geography. The closer Neandertals were to Africa, the more likely it seemed they got encorporated into modern human populations. Conversely, the further away they were the more likely a flat replacement was.

So, while interesting, this is far from the last word.