They should have sold to MS when they had the chance. The management got too greedy: a great example to management putting their own interests before that of the shareholders.
If they accepted the MS offer while they could, Yahoo shareholders would have been much better off - Yahoo directors would have lost, as would many employees, and MS shareholders would have been screwed, but none of those should be the prime consideration for Yahoo directors.
I cannot see MS (or anyone else) offering anything like as much for Yahoo again. I really cannot see Yahoo recovering: even their best sites (like Flickr) are not doing too well, and a lot of what used to be good services (Messenger, Finance, Mail) are simply not keeping up with the competition in terms of features or usability.