It's looking more like MicroHoo is going to happen, sooner or later and there's a post about it in Is Microhoo a Done Deal?  More or less, Yes.   It's not a question of weather it will happen or not, but of how much will Yahoo get and when it will agree to be acquired, according to Search Engine Land:

"…As distasteful as it might be for proud Yahooers to make plans for the future Microhoo, from their SEC filing we now get early indications that they’re preparing to negotiate, not fight. For the good of both companies, consumers, and business partners, it would be quite a feat if Yahoo! could secure some real commitments to preserving the best elements of the Yahoo! brand, and to planning the future intelligently rather than gutting the company for its perceived assets. Handshake guarantees typically carry little weight post-merger, so goodwill would have to be combined with a serious Yahoo! presence on the board of directors, and long-term contracts for key Yahooers in positions central to the growth of the new company."

I still say, the main reason for this acquisition is to extend Microsoft's real estate to advertise and target on - and that's what I always thought - and, the merger is not about Search - because a Microhoo can't catchup with Google and should not bother:

"…Currently, AdCenter matching technologies are pure and they don’t employ any type of stemming or broad matching technologies. In fact, in several verticals, we see higher conversions from AdCenter than we do in Google and Yahoo!. The next major hurdle is to increase traffic which they hope to do with the Yahoo! acquisition."