From the National Hurricane Center
Hurricane Rita has shifted east, now looking to make landfall to the east of Houston, near Port Arthur and the Texas-Louisiana border. The strom is weakening, but is still a Category 4 hurricane at the time of this post.
UPDATE 1:45 PM MDT: Hurricane Rita has now been downgraded to a Category 3 storm. The hurricane is expected to make landfall near Port Arthur, Texas, as a Category 3 storm.
In New Orleans, the plug in the breach of the 17th Street Industrial Canal has been overtopped, and the Ninth Ward of New Orleans is flooding. More rain is expected.
That seems to be the major concern right now - rain. While there will still be significant coastal damage, the forecasts are suggesting that the hurricane will stall after landfall, causing heavy rainfall and major flooding well inland of any storm surge effects. This could spell more trouble for New Orleans and Louisiana, and more than enough trouble for east Texas.
Some local sites and weblogs to watch:
Houston Chronicle and their special weblog, Stormwatchers
Galveston Daily News
Wall Street Journal - Storm Tracker
Blogs of War - Hurricane Rita page