"OpenSim is a free and open standard virtual world server founded at the beginning of 2007 by a small group of developers. The OpenSim platform can be used for creating and deploying immersive 3D Virtual Interactive Environments. The realXtend project's mission is to assist in bringing forth the next generation of virtual reality development by focusing on interoperability technologies, usability and real-life application support. realXtend brings to OpenSim professional experience and development in the realm of 3D engine programming, voice over IP and network support, and is contributing many new features such as improved 3D graphics and voice chat."
Of course, until we actually get a lot of people around using OpenSim, we won't know how well it really scales, and whether it can really match the performance of Second Life servers. And, until Linden Lab open sources its own server code, we won't really know if OpenSim is a dead end.
But the addition of realXtend is an indication of what the Lab has to open source sooner rather than later: open source development models encourage fast turnaround of new features, "experimental" forks which can feed back into the main trunk, and much more besides.