I think what it is saying here is that some ATI employees feel that fp24 would be sufficient at this time. However the spec requires fp32, and even if R420 supported all the SM3.0 features, it wouldn't get the badge on a technicality.It’s generally agreed that SM3.0 requires a move to 32 bit floats (some still think it’s not)
But - The spec requires it...
It is indeed talking about flow control here. My question, at first, would be: does it hurt badly for R420 only or for both chips. Then there is the use of "expect" so, I would conclude that they don't expect NV40 to be very fast with flow control, but they really don't know for sure. On the other hand, they seem to be quite certain R500 will be fast here .Steer people away from flow control in ps3.0 because we expect it to hurt badly. [Also it’s the main extra feature on NV40 vs R420 so let’s discourage people from using it until R5xx shows up with decent performance...]