Yeah, it will probably be on par with current integrated graphics. I doubt it would be powerful enough to be all that useful as a dedicated physics processor but I could be wrong. I would think the main functionality might come from using it with something similar to Nvidia's Optimus where the computer can switch between the two graphics adapters depending on what is necessary. It would save power and be especially useful for notebooks but considering the low idle power of the more recent cards I guess it wouldn't be that big of a deal.
I definitely wouldn't say it is dead end technology though. The perspective on this message board is mostly in terms of gaming but the vast majority of computers are not intended for gaming and for those this may be more than adequate. It may also allow AMD to remove integrated graphics from all of their chipsets in the future, perhaps decreasing slightly the cost to produce a motherboard.