On NPR's Morning Edition today they spoke with people who have monitored the level of the City of New Orleans since 1950. It has been sinking at the rate of about 2 feet per century, and all of this water will help speed up that rate. Considering the rate of sinking (due to "subsidence") and the toxic sediments that will settle out and remain after the water is gone, it sounds like a dangerous place to rebuild.

Saving New Orleans, a Sinking City

Abstract: Morning Edition, September 8, 2005 · Katrina's damage to New Orleans is not surprising to geologists. The city was built on loose soil that compacts over time, causing it to sink every year, and the sea level is rising. Planners will have to consider this as they discuss how to rebuild the city.

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