The R8 dominated for years for two reasons. One was that the whole rear-end including the gearbox could be changed in around 20 minutes. That meant even a rear-end shunt or a gearbox problem would not significantly damage a race for these cars. When R8s finished 1, 2 and 3 at Le Mans only the 1st placed car would have been trouble free the whole race. The other two would have had major repairs performed during the race and still finished on the podium to the exclusion of privateer enterants. That was partly down to the quick-change rear-end and partly down to the R8's pace. The R8 wasn't an especially quick car over a single lap - the MG Lola EXP was almost as fast and it wasn't even in the top class and in 2005 the DBA/Zytec was much faster due to the equivalency rules imposed on the old R8 chassis. Even so, when raced against cars of similar pace, the R8 had a huge advantage due to it's Direct Injection V8 engine. This injected the fuel directly into the cylinders like a diesel engine does and results in greater fuel efficiency. That allowed to the R8 to stay out one lap extra in each stint - a huge advantage over a 24 hour period.

That fuel efficiency advantage was nullified in 2005 by the smaller fuel cell imposed on older cars by the ACO, but a similar advantage will be gained by the Audi R10 when it debuts at the 2006 Le Mans 25 hours. Mulsanne Mike says:

... the diesel comes with many advantages within the regulations, namely variable geometry turbo chargers (turbo gas competitors must still use fixed geometry turbos) which allow for much better throttle response, larger diameter inlet restrictors allowing for equal if not more power than gas-powered competitors, diesels are allowed to refuel at a faster rate in that their refueling restrictor is of a larger diameter, diesel fuel has a higher energy content than gas and for a given cubic capacity (in this case 90 liters) a diesel engine will be expected to go further (more fuel efficient), finally, diesels produce awesome torque (800-plus pound-feet vs 500-plus pound-feet for the R8). So yes, you have to think the R10’s diesel is an upgrade.

I don't believe any independent engine manufacturer will have the budget to produce a diesel engine to the same specifications. Word is that will enter Le Mans with a diesel engined car in 2007 to give Audi some competition. From Peugot's history in sprotscars I'd say there is some hope for privateers as they may be willing to sell engines to the likes of Pescarolo and Courage. Everyone else will have to suck it down basically. It's likely that most of the privateer action will be in the LMP2 class anyway as there's little chance of anyone but Audi taking the LMP1 class win.

The ACO set the rules on CI engines I am told, with the goal of attracting back Peugot as a constructor. Instead they've got Audi, although Peugot may follow. However I'm not sure attracting the big auto manufacturers is such a good idea in the long term given that it both drives out privateer involvement and reduces spectator interest due to the same people winning all the time. Formula 1 has finally realised this but it seems the ACO might not realise it for some years to come.