I don't think anyone believes that Microsoft would buy Yahoo for it's Search Engine - both Search Engines aren't that good, but neither is Google's; searchers use Google because it's ingrained in them to do so.

The acquisition is more about online advertising according to HitWise and mentioned in Microsoft and Yahoo!: Putting the Offer in Perspective:

"….If we combine the top properties for the three companies, the combined market share of visits (U.S.) for Microsoft and Yahoo! would be 15.6% of all Internet visits, with Google at 7.7% for the week ending January 26, 2008.

 

There's just a lot more places to show advertising if Microsoft has Yahoo's properties - meaning a lot more money flowing in - seems like a good deal to me.  

But from a Search Perspective, the acquisition would not help Microsoft much

"… But if we consider only search volume, the picture is very different. For the four weeks in January 2008, Google accounted for 65.98% of all executed searches in the U.S., while combining executed searches for Yahoo! Search and MSN Search would amount to 27.84% of executed searches for the same time period.

 

 But that's OK, because this acquisition is not about Search.