Lil' Dragon, or RV870, is under much speculation right now. Facts are thin and whether we're looking at another spawn of R600 or if it is a whole new chip is being debated, but it looks like we're heading for another tweaked chip based on the R600 core, found beneath the massive cooler used by Radeon HD 2900 XT. RV770 has been a huge success and AMD seems confident that the next generation will hit NVIDIA even harder, but we're still a bit uncertain as to what NVIDIA has coming so we can only speculate there.
We've been told that AMD has promised partners that its next chip, that would be RV870, will sport DirectX 11 support and much improved PowerPlay. We can safely say that improving PowerPlay should be quite easy for AMD since it is in-house technology, and it doesn't work nearly as well as we had hoped, but DirectX 11 is not done yet. DirectX 11 will run on Vista though, so you don't have to worry about waiting for Windows 7.
DirectX 11 was first unveiled in July at Gamefest 08, Seattle, but was also displayed at NVISION 08 a month later. Some of the major updates include tesselation and Shader Model 5.0, which both require hardware support, while other news remains undisclosed. Tesselation enables faster and smoother rendering of complex 3D models with fewer polygons needed through a tesselation engine buried inside the hardware.
AMD's promise of DirectX 11 support points to that that the tesselation engine that has been more or less dormant inside R600, will now be activated, and that RV870 will sport Shader Model 5.0. Other hardware specifications remains clouded at this time, and the rumor of 2000 shader processors remains unconfirmed like so many other things. Do remember though that AMD's shaders are small (you do remember the jump from 320 to 800 with RV700?) and we should not dismiss anything at this time.
Another things AMD will release when unveiling the new architecture is OpenCL, it's answer to NVIDIA's CUDA software technology. It's is basically the same thing with general processing tasks being executed by a GPU, thus GPGPU. AMD will equip the next generation cards with GDDR5 as well, but at higher speeds. AMD has been promised chips operating at 5GHz for when it is time to launch. RV870 is 40nm so you should not expect anything until TSMC can pump out enough chips for AMD.
It would be interesting to glare at NVIDIA's roadmap, because right now it needs more than just shrinking G(T)200. The code name GT212 certainly doesn't point to any new architectures, but mere updates of GT200 and it is very hard to say if this chip will bring what NVIDIA needs to compete with AMD. And yes, AMD is still looking to bring the best performance/buck, not building huge monolithic chips. If NVIDIA is doing the same with GT212, it might have something.
AMD is still talking to Valve, but since it has Blizzard on its side now, it feels quite confident and sees no reason to rush into anything with Valve. Recent statements made by Valve developers also points to that Valve wants to focus on multi-core rather DirectX 10.1 or 11 for that matter, but this may very well just be tactical statements to pressure AMD.
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