From a TimesOnline report [business.timesonline.co.uk] on the Microsoft shareholders meeting:
[Ballmer] said that if Yahoo! were still interested in a search deal, then Microsoft would be. "I think it is an interesting possibility to look at a search collaboration with Yahoo! as we had proposed last summer. There's no active discussion on that front. But we'd be very open to it. But acquisition discussions are finished."
I get the feeling that was all they really wanted from the beginning. That makes the most sense. They've wanted to get their hands on all of those search patents Yahoo snapped up. That would certainly jump-start the MS SE.
IMHO the rest of the Yahoo portal is not really compatible with what MS is bringing online with its new Live offerings. It's hard to see how that would be integrated into the MS world.