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I hate it too and think that although with certain limited searches it may make sense I don't think the general public need their SERPS censoring by MSN. Especially when there is a clear option for selecting just where you want your results to come from in the main interface...
Anyway thats the way it is for now, like it or loath it.
I see some truth to the local theory, as we rank very well in the Canadian version of MSN, while over the last 4 months we've slowly lost many of our positions we'd had for ages on MSN.com.