Faith + Reason = Truth

It's all about the name.  When you search for something, and you decide to go to a search site rather than use your browser's search that's built into the toolbar, you type in a url.  Typing google.com or yahoo.com feels "cooler" than typing in msn.com - first, because they're creative words that you really weren't using in your everyday vocabulary until those companies came along; second, because they're not initials; and third, because there's no direct connotation of Microsoft and all of the evil empire/Darth Vader imagery that the name is associated with for so many people.
The solution is simple, really:  just make up a creative-sounding word that in no way implies any association whatsoever with Microsoft, and then take a small percentage of the billions that would be used to buy a Yahoo and instead start building the new brand.  Building brands can be done in the blink of an eye and with virtually no resources compared to how long it used to take (just ask Youtube, MySpace, Digg, Technorati, ...), although Microsoft isn't in the position of having to worry about resources.  It is, however, up against it in terms of getting this new brand built quickly, with every passing day seeing Google expand its already gargantuan lead.  And if you've looked at Google's balance sheet and income statement lately, you'll notice that it's no longer the under-resourced,try harder scrapper that it once was in comparison to big bad Darth.  In fact, it has quickly become an empire in its own right, with the jury still out on the question of whether it is becoming or has already become evil.  Microsoft's msn.com could have the best search technology in the universe (it doesn't, but it could), and people wouldn't use it because of the name.  That's a situation that can and should be rectified in short order if Microsoft is serious about how important search and ad revenue is to its future.