It was clear that Yahoo never planned on being a search company when they passed on buying Google. And you're definitely right: Yahoo operates much better as a destination site. But in terms of media creation, Terry Semel and his Hollywood crew was brought on for that and it was just a waste, treading waters, not grabbing YouTube, not grabbing Facebook, flubbed on creating a better search ad product, etc.
They should have just worked it out with AOL last year.
Just looking at the homepages of Google vs. Yahoo - it's clear that Google's focus is search. On Yahoo's home page, search is just a feature on a page littered with tons of bandwidth hogging widgets.
But Bing is clearly a search engine. That's the central focus and that's what people will remember. It might not be "top of mind" for most of us but it's going to be top of mind to a lot of Yahoo users soon enough.
The market's immediate reaction: "Yahoo Shareholders Transfer $2.9 Billion To Microsoft Shareholders" - http://bit.ly/yn2TT
They should have just worked it out with AOL last year.