The latest (mostly rumor) news is that News Corp (yes--the one who owns WSJ and MySpace among other properties) is interested in pooling MySpace with Yahoo. On the face of it, it makes sense for News Corp. to try to get into this game: MySpace + Yahoo will be a formidable competitor against Facebook (5% owned by Microsoft). But, I do not see how this could yield $40 plus billion dollars in valuation to seriously reject Microsoft's offer.
It is more of the mating dance to up the ante. As I said before, the real question is: How high will Ballmer & Co. go to acquire Yahoo (and not make the same mistake that AOL made).