"The merged format will make use of Sony's 0.1 millimeter Blu-ray disk technology with Toshiba's software in place for reading and writing from the disk and handling copyright protection. Toshiba's 0.6 millimeter HD-DVD disk technology will be dropped."

If this turns out to be true, this means the discs will hold 50 Gbs, vs. 30 Gbs. That will be nice.

"How much of an improvement will it be over current top-tier transfers, like LOTR, SW PT, Matrix, ect?"

Well, just for perspective, an uncompressed capture of the SW LD is 20 Gbs. Using HuffyUV (with a 4-1 compression ratio) comes out to around 30 Gbs. If you could see the Huffy capture of SW, and compare it to the MPEG-compressed DVD version, you would see a stunning difference in detail, and this is just at 480 lines of resolution. As Jay noted, HD-DVD/Blu-Ray has the capability to go to 1080i (although the HD spec goes to 1080p), so the amount of detail possible is far greater, on par with what is actually scene on a movie screen.