We present new near-infrared Keck and VLT spectroscopic data on the stellar dynamics in late stage, ultra-luminous infrared galaxy (ULIRG) mergers . We now have information on the structural and kinematic properties of 18 ULIRGs, 8 of which contain QSO-like active galactic nuclei. The host properties (velocity dispersion, effective radius, effective surface brightness, M_K) of AGN-dominated and star formation dominated ULIRGs are similar. ULIRGs fall remarkably close to the fundamental plane of early type galaxies. They populate a wide range of the plane, are on average similar to L*-rotating ellipticals, but are well offset from giant ellipticals and optically/UV bright, low-z QSOs/radio galaxies. ULIRGs and local QSOs/radio galaxies are very similar in their distributions of bolometric and extinction corrected near-IR luminosities, but ULIRGs have smaller effective radii and velocity dispersions than the local QSO/radio galaxy population. Hence, their host masses and inferred black hole masses are correspondingly smaller. The latter are more akin to those of local Seyfert galaxies. ULIRGs thus resemble local QSOs in their near-IR and bolometric luminosities because they are (much more) efficiently forming stars and/or feeding their black holes, and not because they have QSO-like, very massive black holes. We conclude that ULIRGs as a class cannot evolve into optically bright QSOs. They will more likely become quiescent, moderate mass field ellipticals or, when active, might resemble the X-ray bright, early type galaxies that have recently been found by the Chandra Observatory.

accepted to be published in ApJ, 7 figures