On Tuesday TechCrunch and CNet, based on the usual “sources,” reported that talks between Yahoo and Microsoft were back on, stories that prevented Yahoo’s desperate, bewildered, shuttlecock stock from dropping below the 20-dollar barrier and landing in the high teens where it was when Microsoft entered the picture on February 1. It was certainly headed in that direction.

TechCrunch claimed the companies were back talking about an acquisition of all of Yahoo; CNet said it was just for a piece and said it heard several people on Yahoo’s board were “open to a possible sale of the company’s search business.”

The conventional press eventually claimed nothing had changed. Microsoft would still buy Yahoo’s search business if Yahoo would let it but nothing was going on talk-wise.

Some armchair generals figure Microsoft should move in now for the kill and get Yahoo on the cheap. Others figure it’s biding its time on the theory that Yahoo’s quarter will come a cropper.

But the Wall Street Journal blog All Things Digital thinks there’s a plan afoot, pressed by Yahoo investors and countenanced by a couple of people on Yahoo’s board, for Microsoft to buy around a third of Yahoo for $30-$32 a share – rather than the 16% at $35 a share it proposed last – and get control of the company that way. News Corp could even be involved, it said, restating that there are no formal talks going on.

Then, given that backdrop, Yahoo chairman Roy Bostock and CEO Jerry Yang late Wednesday wrote an open letter to Yahoo stockholders ostensibly to ward off an Icahn-led overthrow of the Yahoo board on August 1.

Unless Bostock and Yang are like the pre-teen girl who likes a boy so she hits him. At least it suggests the issues Microsoft might have to address.

Anyway the letter covers a lot of ground covered before but basically defends the Yahoo-Google deal and claims that Microsoft’s so-called “hybrid” proposition of just buying its search operation wasn’t as good as Microsoft made it out to be.

Microsoft claimed that its alternative arrangement would have resulted in a billion dollars in annual cash flow to Yahoo and would have trounced the $250 million-$450 million in incremental cash flow that the Google deal is supposed to be worth the first 12 month after it’s implemented.

This latest Yahoo letter assures everybody that the “board and management made a great effort – and conducted in-depth negotiations – to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo, but without success.”

The Microsoft proposition – $1 billion upfront for the search business and an $8 billion investment in Yahoo – would have “required Yahoo,” the letter says, “to commit to a 10-year exclusive arrangement that would have made us dependent on Microsoft for all of our search business. It would also have given Microsoft veto rights on certain future Yahoo actions, including a sale of Yahoo.”

It says the Microsoft deal would have had “a significant adverse impact on Yahoo strategically, leaving the company without the operational control of search assets and technology we view as critical to our objective of becoming a leader in the converging search and display advertising business.”

On the other hand, it calls the widely scorned Google arrangement a “carefully structured agreement [that] strikes the right strategic balance, enhancing our financial results while advancing our strategic objectives of being the starting point for most users on the Internet and offering such compelling value that advertisers will see us as the ‘must buy’ in online advertising.”

And besides Yahoo can get out of it. “It would not preclude a transaction with Microsoft or any other potential acquiror in the future,” the letter says.

It doesn’t spell out that they would have to pay Google a $250 million termination fee or that the deal will have to pass antitrust scrutiny.

Meanwhile, the company, which is losing senior managers right and left, has launched into a major reorg while Icahn plots its takeover.