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To get their DNA we would have had to breed with them (As you say) and the offspring from that union would then carry both of their genetic material. whether or not that offspring only mated with humans or not, would not alter the fact that it's children, would have a neanderthal as a grandparent, and all children of that line would have a neanderthal as a ancestor.

Or am I missing something?

No, not at all. You might also say that a marriage between a Frenchman and a Vietnamese woman might produce offspring with ancestors from those two regions of the world. It’s a little misleading however to ask (see opening post), “...what would happen if modern man and his prehistoric ancestor were to square off?” as it gives the impression that the ancestors of Homo sapiens are Neanderthals – they aren’t (although we carry some of their DNA).

Neanderthals might be better seen as our cousins, whose proper ancestor was certainly the same as ours - Homo heidelbergensis.