It wasn’t just Yahoo Chairman Roy Bostock and Microsoft CEO Steve Ballmer meeting in New York last week.

According to several sources close to the situation, Time Warner CEO Jeff Bewkes rounded out the trio of chit-chatting execs, presumably gathered to discuss possible partnerships and other deals between and amongst the companies whose digital assets are among the largest on the Web.

Although the possibilities are numerous, exactly what Bostock, Ballmer and Bewkes–let’s call them the Busy B’s from here on out–were cooking up is unclear.

But for Yahoo (YHOO), Microsoft (MSFT) and Time Warner (TWX), which owns the AOL online service, it is a meal that is probably long past due.

That’s especially true given the struggles each has had with his online assets of late.

Some sort of alliance between the threesome could be a way each could solve those problems and more importantly, create a Web counterweight to the growing power of Google (GOOG).

Last week, on the heels of Carol Bartz’s appointment as new Yahoo CEO, BoomTown wrote a post noting that Microsoft was ready to deal in its long-sought-after effort to strike a search deal with Yahoo.

Last year, the software giant launched a takeover battle for Yahoo, which was resisted and ultimately abandoned. But Microsoft never lost interest in doing an outright deal to buy Yahoo’s search assets or create a significant partnership around search.

Yahoo has been long been lukewarm to such an idea, first rejecting Microsoft outright in favor of a deal with Google.

Since its Google deal collapsed over regulatory concerns, Yahoo has still dragged its feet about the notion, with its board divided over the right course of action.

And, while Bartz told Yahoo employees last week that her “gut” did not favor the deal, most saw that more as a negotiating ploy than a signal that Yahoo was not at least somewhat interested.

It has to be, given that many of its investors and also Wall Street have been eager for Yahoo to make such an alliance.

Therefore, the sighting of Ballmer and Bostock at the Time Warner Center in Manhattan together, first reported by Valleywag late last week, was a sign that relations between Yahoo and Microsoft were improving.

(The Ballmer/Bostock confab was also later confirmed by the New York Times.)

But sources at all the companies have said Bewkes was also meeting with the pair, which makes it clearer than ever that a much bigger and more complex game might be afoot.

It’s kind of inevitable too, given that this group has done more back and forth blabbing and bickering than Paula Abdul, Simon Cowell and Randy Jackson on “American Idol.”

That’s because Yahoo and AOL have also been involved in serious, but painfully prolonged, discussions to merge, talks that were tabled once Yahoo CEO Jerry Yang said in November that he was stepping down.

In addition, Microsoft has been interested in eventually renewing its bid for AOL’s search business, which is now run by Google. Microsoft lost out to Google the last time the contract was up.

It recently paid a small king’s ransom to become the key search partner of both Dell (DELL) and Verizon Wireless (VZ), distribution deals that have become one of Microsoft’s favored tactics to take some market share away from Google.

Microsoft even hired a well-known Yahoo search techie, Qi Lu, to head its digital efforts, mostly to turbocharge its search business.

But given that Google’s search share is over 70 percent now, which yields it a lion’s share of the search ad dollars, none of this has been enough for Microsoft to get true traction in the search game.

That’s why some sort of union with Yahoo is probably critical for Microsoft, since this would get it past the 20 percent share mark.

As for Bewkes, he has been mightily trying to unload AOL, which has had a long and painful history with Time Warner.

So it’s clear the trio had a lot to talk about.

And I hope they get creative this time, rather than just rehashing the same old ideas that have still not been consummated.

Here’s my suggestion, which is a bit nuts, to be sure, although variations of it have previously been considered by all the companies:

Instead of Yahoo doing the acquisition, which it can ill afford with its depressed stock price, Microsoft buys AOL for $4 billion to $5 billion.

It then quickly spins AOL’s content, advertising and communication assets into Yahoo, nabbing the search business, throws in some cash as an investment and perhaps even its MSN assets. Microsoft gets a large stake in the newco.

Time Warner gets the cash from the AOL sale and perhaps even a stake in the newco, along with perhaps striking some kind of interesting online deal for the rest of its copious media assets.

And Yahoo gets to own massive assets in content, communications and premium advertising on the Web. While it would lose search, Yahoo would also get a pile of money, along with enough key search data from Microsoft that it would drown in it.

And, most importantly, Yahoo could focus on what it does best rather than get squeezed in a search arms race between Google and Microsoft.

And if the meeting among Bostock, Ballmer and Bewkes was only another chapter of the endless and unsuccessful talks that have so far lead exactly nowhere?

Well then, the three will eventually look more like the Three Stooges than anything else.

Thus, BoomTown’s translation of Saturday’s letter from Microsoft (MSFT) CEO Steve Ballmer to the Yahoo (YHOO) Board of Directors, which has been resisting the software giant’s efforts to buy the troubled Internet portal for $31 a share in an unsolicited takeover.

The well-written letter was surprising in its clarity, but it still masked several secret messages.

Ballmer wrote: April 5, 2008
Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Members of the Board:

Translation: Dear Members of the Board, whom I will be replacing very soon with my own slate, which includes the three judges from “American Idol” (Simon promises to behave and Paula promises not to), as well as the sock puppet from Pets.com, the PC Guy in those #@#*! Apple commercials and also Microsoft Bob.

Ballmer wrote: It has now been more than two months since we made our proposal to acquire Yahoo at a 62% premium to its closing price on Jan. 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy.

Translation: What? A middle of the night crank call from me, yelling and screaming and threatening “Terminator”-like destruction if you did not acquiesce was too much?

Didn’t you get the flowers I sent the next day?

Ballmer wrote: While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorized Yahoo management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.

Translation: I tried not to be annoyed when you had dinner with News Corp.’s (NWS) deal-loving Rupert Murdoch, or when you flirted with those we-gotta-make-some-move-any-move execs at AOL (TWX) (Bebo for $850 million in cash=Microsoft’s $240 million investment in Facebook).

But dithering around with Google (GOOG), whose secret corporate motto is “Poke Microsoft With a Stick Often,” even after it has been slapping you around Silicon Valley for years?

Ballmer wrote: During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo’s search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly.

Translation: Google keeps slapping you silly in search, then you slap us with a costly severance plan. It’s like we’re Curly in a Web-version of “The Three Stooges.”

Why I oughta….

Ballmer wrote: By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.

Translation: Legg Mason and Cap Re and Citi and the rest of them are with us and not with you. Why? They like us, they really like us. Also, we are much scarier.

Ballmer wrote: Given these developments, we believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies that will deliver superior value to our respective shareholders, creating a more efficient and competitive company that will provide greater value and service to our customers. If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective, which will be reflected in the terms of our proposal.

Translation: We can do this the easy way or the hard way. The easy way includes tasty breakfast pastries and yummy hot cocoa (unlimited marshmallows, of course!) and lots and lots of hugging.

The hard way? Tepid lattes in the Silicon Valley soup kitchen lines for you, after your stock drops to the bottom of a bottomless well when we pull out!

Ballmer wrote: It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo’s shareholders and employees. We think it is critically important not to let this window of opportunity pass.

Translation: Like I said before, I won’t be ignored, Jerry! I have a very sharp proxy firm and I am not afraid to use it!

Also, I am not above boiling your annoying exclamation point.

Ballmer wrote: Sincerely,

Steven A. Ballmer
Chief Executive Office
Microsoft Corp.

Translation: If you’ll be my bodyguard,/I can be your long lost pal!/I can call you Jerry,/And Jerry, when you call me,/You can call me Steve!