This is all just conjecture and opinion, mind you, based on Microsoft's corporate personality. Microsoft has an disturbing history of pursuing complete domination and control in whatever market they enter and have been involved in a number of high-profile anti-trust proceedings including in 2002 when they illegally tried to push Netscape out of the browser market (very pertinent to the current story).
As many users of browsers other than Internet Explorer have found, Microsoft has also arranged it such that many web sites offer content only accessible or only easily accessible if you're using IE, or worse, only if you're using IE from a Windows platform (Mac users: try getting Yahoo video news or even Yahoo games to play reliably in Safari or even Firefox).
Furthermore, as even a couple of their own executives have admitted, Microsoft seems to generate code bloated software plagued by security problems, some devastatingly serious. Not the kind of philosophy I'd want in charge of the second-largest search engine and a vast source of content for milliions of internet users.
Also, since many access Yahoo.com for news, I'm uneasy with a de facto corporate monopoly controlling the source that presents us with the news we read. Did you know that under the Bush administration, more has been done to increase regional news source monopolies and reduce the various sources from which people obtain information than any other in the information era, particularly where the FCC in concerned? As a result, many people are quite wary of corporate media consolidation.
In a similar vein, how about all those ads on Yahoo and Yahoo-linked sites? Want them all to be about Microsoft products? Or products that preferentially or only run on Windows. America has always been about choice and this scenario can only lead to Microsoft's consolidation of monopoly power.
My 2¢? Microsoft is a software company (OK, they do make a decent game console). In fact, it's the largest, most powerful software company in the world. Let it be that, and let the internet be the internet. I get cramps when I read about combining the two.
-K