I haven’t looked into either much. But my gut tells me that the real web/desktop blurring will happen through the browsers themselves. XUL (the Mozilla framework) is hugely popular, and Mozilla Prism looks interesting. However, the most developed thing is the ‘offline’ support provided by the new Firefox 3 (which is based on an emerging HTML5 standard) – kind of like Google Gears, but without needing an extension.