Is Microsoft about to make another move on Yahoo? Or perhaps on AOL? Or is it just getting ready to articulate strategic plans for getting serious about the online search business on its own at its financial analysts’ tomorrow morning?

Or perhaps–and this might be the best strategy for the moment–the software giant is actually managing to stifle itself and wait to return to the playing field when things settle down a little bit.

One thing is clear: Microsoft (MSFT) has got to be plenty irked that its efforts have been vexed once again, this time by by the proxy fight settlement its one-time takeover quarry, Yahoo (YHOO), made earlier this week with activist investor Carl Icahn.

Icahn had been working in concert with Microsoft to pressure Yahoo into striking a deal to sell its its search business.

That attempt failed badly and, in fact, the repercussions of the failure sent Icahn right into Yahoo’s arms.

By no means does this mean that Microsoft’s persistent interest in grabbing Yahoo’s search assets has gone away–no matter all the noise, Microsoft would get a great boost from controlling the No. 2 player’s market share in search.

Even those inside Microsoft have long regarded Yahoo as an “accelerant” to its long-term strategy of building a large-scale business in online advertising.

But, as one source said, “it is now a game of timing and it’s probably better to be a tortoise than a hare here.”

While most do not expect Microsoft to make another bid for all of Yahoo, it is likely that the company will again try to rejigger its proposal for buying Yahoo’s search business after Yahoo seats its new board, which will include Icahn and two others of his choosing (with Yahoo’s consent).

Since Yahoo can no longer use Icahn as a reason for rebuffing Microsoft’s latest proposal to buy its search business, it will have to rely on its other major argument against such a purchase–that Microsoft is still not paying enough for an asset it must have.

A source close to Yahoo’s thinking said that even the generous $20 billion revenue guarantee in Microsoft’s latest bid was too low, because Microsoft is basing it on the assumption that Yahoo’s search business is declining.

And while Yahoo’s search business is not growing like gangbusters, especially compared with Google (GOOG), it is still growing, and Yahoo wants Microsoft to pay up on that basis.

In addition, Yahoo wants a premium for the regulatory and integration headaches such a deal would entail. “They have to better compensate us for buying something they want and we don’t have to sell,” said one Yahoo source.

To be fair, Yahoo cannot be quite that sanguine about its situation. To communicate “no confidence” in the company’s leadership, at least one major investor is considering withholding its vote for specific board members closest to the deal-making of late at Yahoo’s upcoming annual meeting on Aug. 1.

Likely targets are Yahoo CEO Jerry Yang, Chairman Roy Bostock and board member Ron Burkle.

And either today or tomorrow, the large proxy-advisory service, ISS Governance Services, which Yang and other Yahoo execs and board members visited last week to state their case, will make its recommendation to shareholders. Others, like Proxy Governance and Glass Lewis & Co., will also weigh in.

All are likely to ding Yahoo’s leadership in some way.

What all of this sets up is the next chapter of what Yahoo will need to do to push the reset button after the newly constituted board is officially formed and gets down to business.

If Yahoo does not get down to business quickly, the button will most definitely be reset for it by others.

Finally, for your viewing enjoyment, here is a video of Young MC performing “Bust A Move,” and just below it–in our single favorite tech video of all time–Microsoft CEO Steve Ballmer busting his own move:

Listening to all the birds-on-a-wire chatter about what will happen in the latest round of the never-ending Microsoft-Yahoo saga, it’s still hard to know what to think, given the ever-increasing noise around the proceedings, which will continue until Yahoo’s Aug. 1 shareholder meeting.

Yesterday, it got louder still as Yahoo Chairman Roy Bostock and CEO Jerry Yang sent out far and wide yet another stinkbomb letter, calling activist investor Carl Icahn a money-grubbing “corporate agitator.”

Well, yes–not that there’s anything wrong with that!

Unless you are shocked, shocked, that gambling is going on here, as Yahoo (YHOO) apparently is (not really, but it makes for a good story).

But not content to stop there, Yahoo spun a tale of what BoomTown can only describe as a sitcom paranoid fantasy about Microsoft (MSFT).

Essentially accusing Microsoft of trying to grab Yahoo on the cheap, Yahoo mocked its odd-couple “alliance” with Icahn.

“Microsoft’s flip-flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo,” they wrote.

Doubtless, today or tomorrow will bring a fresh retort from Icahn or Microsoft, full of the same not-so-sweet nothings (and by nothings, I mean nothing).

But enough of the past! It’s time to look to the future, sketching out some possibilities of what’s really going to happen.

There is no question that Icahn has no choice but to keep up the fight, although there’s also no question in my mind that he will remain in touch with Yahoo in some way, in order to hint that he is willing to accept a few board seats.

What Icahn truly needs, though, is to present a solid management team and a cogent plan, if he has any hope of convincing major investors to back him.

Because while many are decidedly unhappy with Yang and the current Yahoo board, taking such a major step as dumping them and leaving the company in Icahn’s hands–even for the short time he would be there–is decidedly more risky.

Can you say massive employee exodus, which will make the current spate of departures look minor? Can you say complete lack of leverage with Microsoft? Can you say cut off your nose to spite your face?

Meanwhile, Microsoft will refuse to engage in discussions with the current Yahoo board, and will keep up its current talks with Time Warner’s (TWX) AOL to keep the pressure on.

But if Microsoft does consummate that deal, it will have forever turned its back on Yahoo and its chance to grab hold of Yahoo’s search advertising and, perhaps, even its display business.

That would be a really dopey move, if the company truly means what it says about wanting to be competitive in online advertising.

While Microsoft probably should pay up and buy all of Yahoo to get what it wants, that boat has sailed.

It would be better if Microsoft tried to formulate a three-way deal in which AOL and Yahoo merge and Microsoft invests in the newco, becoming its search and search-ad provider.

In that way, regulatory issues over the obvious communications monopoly, were Microsoft and Yahoo to merge, would be moot, and the combined dominant content properties of Yahoo and AOL would command premium display-ad prices.

For Yahoo’s board, the situation is actually simpler. First, the board has been publicly insisting that it will sell Yahoo whole for $33, mostly because it cannot do otherwise.

Why? Well, it would be sued until the next millennium if it accepts any price lower than what was once offered by Microsoft. Only a new board could accept a lower price.

In order to prevent that from happening and keep shareholders from voting them out, Yang and the board must begin to concretely sketch out what they will do to fix Yahoo and bring its share price back up.

Yahoo has already indicated it could sell its Asian assets, which would bring in about $9 billion to dole out to shareholders. And there are certainly other moves it could make.

But probably what Yahoo has to do most of all is give shareholders a sense that its leadership going forward can handle the challenges ahead or is willing to change as needed to meet the challenges.

I sense that Yang is perfectly willing to entertain the idea of bulked-up and broadened management at Yahoo.

And while I do not think it likely, I suspect Yang would even step aside as CEO if that’s what it would take to keep Yahoo independent or allow it to make alliances to become stronger.

How this ultimately plays out will come clearer when proxy and investor services outfits–such as Proxy Governance, Institutional Shareholder Services and Glass Lewis & Co.–come out with their recommendations to Yahoo shareholders about a week before the Aug. 1 meeting.

By then, there will be a better sense of where the vote is going. And that, in the end, is all that truly matters.