As the source bases diverge, Cygnus will be less able to fold changes back into FSF's gcc. The danger is that there are not many good reasons why Cygnus should burn time trying to keep FSF's gcc uptodate, when they have egcs. If they stop, this cuts off the FSF from lots of code donations at others expense into the FSF's gcc. This to me seems reasonable. GPLed software is free software, and as such, form time to time, it may have to complete against itself.
Competition is good.
They will be leveraging their skill at testing and bug fixing, and the entire development process against the traditional process that the FSF has used in the past. I am a betting man, and my bets are on egcs. I fear they will take a while to figure it out, and burn quite a few resources in the interim. It is my hope that FSF gcc turns into a very stable, slow moving compiler and that egcs becomes what will become gcc 3.0, at that time, the 2.x line will be scaled back, the FSF will fold in egcs as their own, and life goes on. This is a reasonable thing to do.