GPU's can run x86 code? I don't think so. If it is possible, it has to be compiled with Stream or CUDA dev kits and libraries.
No, current GPUs can't 'run' x86 code. Neither can modern CPUs from AMD or Intel, or any other modern processor for that matter. The internal language in AMD processors is very RISC/ALPHA-like. x86 code is not 'run', it is translated to something that the CPU *is* able to run. You can translate x86 code to basically any internal architecture, although some design philosophies will take a very heavy hit in translation. That's why Itanium has horrible performance in x86 mode, because VLIW designs rely on the compiler to run efficiently, and standard x86 code is not compiled specifically to run well on a unique VLIW architecture.
Funnily enough, Fermi and Cypress make a good comparison to x86 processors and Itanium. Fermi architecture should be able to 'run' x86 code relatively well, except that it's missing translation hardware due to Nvidia's lack of a license. If AMD were to modify Cypress to 'run' x86, it would perform abysmally much the same as Itanium. In terms of compute, it is easier to make fast running code on a Fermi-like architecture, but given a perfect or near-perfect compiler, a VLIW architecture like cypress could run much faster. Of course, this is unlikely to be the case given that AMD can't put as much resources into the software side of Cypress as Intel can with Itanium.
The way I see it, going with a VLIW shader core has allowed AMD to greatly surpass Nvidia in terms of theoretical shader performance, and has allowed them to extract more real world shading performance (in games at least)/mm2 -- even the most ardent Nvidia supporter should be able to agree on that much. What I don't get then, is why AMD is supposedly abandoning such a game winning strategy in Northern Islands. The way I see it, there are two distinct possibilities: One is that the rumors are false and NI will stay a VLIW design. The other possibility is that AMD is looking to pave the way for x86 compatible GPUs, basically their own version of Larrabee except instead of taking existing x86 solutions and turning them into GPUs, they are taking existing GPU tech and turning it into an x86 machine.