This is where I think people need to really take some time and study the economics of this industry and think through the logic of what it takes to design a CPU.
The cost to manufacture a CPU is wrapped around a whole bucket of details, but ultimately it fits within die size and yield... if the die size is large yield is smaller, just by nature of the way CPUs are made. Example say you have 3 random particle defects that kill 3 random die on a wafer. Just as an example, say one die size puts 10 die to a wafer, but a different approach (smaller die) puts 20 die to a wafer, in one case you can kill 3 of 10 die, and yield is 70%... in the second case you kill 3 die or get 17 of 20 die working, yield is 85%. So to get the same through put and on larger die, a company (in this example) needs to increase capacity (tooling) by 15%... this runs into the hundreds of millions of dollars.
Making a monolithic die at 65 nm is relatively large, both AMD and Intel have the quad die of about 280 mm^2. But Intel will get higher yields as a killer only kills 1/2 the die.
Make no mistake, Intel will undoubtedly continue this trend... their monolithic quad will be at 45 nm, to go 8 core they will MCM it.... the monolithic 8 core will be at 32 nm and the 16 core will be MCM.... Intel takes the cost and design complexity and balances that approach to optimize yield and lower costs. Hence, we have a 270-300 buck quad core available to us.
Now, AMD will get a 250-300 buck quad to you as well... but they will not make nearly the money... this is good for you and me, but bad for AMD as their cost will be higher overall.
The compromise to time to market and costs is slightly lower performance scaling across threads.... in servers Intel is paying a larger price for this though as the BW of a shared bus does not compound with core count, this is the uniqueness of AMDs platform design/approach and has enabled AMD to get throughput performance way way up... just smart if you ask me, I think Intel is making a big mistake sticking with the parallel UMA approach this long.
In terms of how much better would they have done... it doesn't matter, pre-Barcelona -- a 2P server with quads just smashes anything 2P with dualies. The question was.. could Intel bring that in at reasonable costs such that the price/performance is compelling... indeed they did... Intel's Xeon 53XX series were not priced 2x above the dualies, rather some 10-20% overall... this is just killing AMD, if AMD had the resources and the design features capable they would have MCMed K8 to get quads out there asap.
http://www.fool.com/community/pod/2007/070823.htm