It will be another 5-10 years before Hyundai can close the gap with Toyota and Honda, but you have to give them credit for making steady improvements. IMO, they've already managed to catch Ford, Chrysler & GM in terms of overall quality.
I think however, that the new Civic will be a real wake-up call to the compact car segment. Once again, when everyone starts catching up, the Japanesse produce a product that raises the bar another notch. Look for Toyota to release a very impressive Corolla in late '06.