Intel hasn't excactly delivered as fast chips as expected with their Q9000 series and their only experience with discrete graphics product so far, the Intel i740, lasted for 18 months before they threw the towel in the ring
You can read about Intels last attempt in dedicated graphics at C|Net News
http://www.news.com/Intel-retreats-from-graphics-chips/2100-1001_3-230019.html and compare with the current situation yourself to make a guess of how well Larrabee will do.
About nVidia not having experience in CPUs the question is why would they need it, they have afterall just declared that it's dead.
When it comes to combined CPU+GPU Intel is playing catch up with AMD who bought ATi, among other things, to make that fusion possible.
To beat AMD to market Intel have planned to make a naphalem processor and add graphics evolved from their current integrated graphics(only Intel knows how many CPU/GPU cores it will have) to launch in early 2009.
AMDs latest plans for Fusion is to launch White Swift a single phenom CPU in late 2009 comming with a GPU with support for Hybrid Crossfire=newer generation that will kick butt on the Intel solution. Later Black Swift a dual core will follow and finally Bulldozer and Bobcat will come and totally integrate the GPU into the CPU.
nVidias spot in all this is that both Intel and AMD in their first versions will have built in support for PCI-e x16 in the processor so discrete graphics will still be an option. Later AMD have plans of making the computer modular, with multiple processor sockets, where companys nVidia can make their own add in module that will have hypertransport access to the CPU for those who wants more graphics power.
I agree interesting times indeed...