I disagree with a number of your points. I've noticed a huge reduction in the amount of spammy content I see in google results (over the last year, maybe), to the point that I actually make "productName reviews" searches again.
Your focus on pagerank is at least somewhat off base, considering that it's only a factor in ranking as noted by someone below, and it's a ranking that pretty much all the search engines use as well ("The Bing ranking algorithm analyzes many factors, including but not limited to: ... the number, relevance, and authoritative quality of websites that link to your webpages").
There is something to be said for no-follow links being a symptom of something broken, but, OTOH, page rank is still a good indicator of what people out on the web find to be useful and relevant content, allowing you to find popular content, cluster it by subject, etc...essentially crowd sourcing (a portion of) relevancy via something people do anyways. Gaming was inevitable, and no-follow is really more of a way to disincentivize spammers...the fact that with no-follow you get the spammers anyways (to get human eyeballs instead of crawlers') demonstrates that the motivation is always there. If a search engine trusts wikipedia's outbound links they don't have to obey no-follow in any case, but you still have the situation that everyone will have their own favorite "impartial" external links to add, not to mention people with a vested interest in the subject.
The possibility you forget in your "microsoft can plausibly compete with [google]" point (leaving aside the fact that most people are just ignoring it) was that bing has improved, and that has nothing to do with google breaking anything.
Your focus on pagerank is at least somewhat off base, considering that it's only a factor in ranking as noted by someone below, and it's a ranking that pretty much all the search engines use as well ("The Bing ranking algorithm analyzes many factors, including but not limited to: ... the number, relevance, and authoritative quality of websites that link to your webpages").
There is something to be said for no-follow links being a symptom of something broken, but, OTOH, page rank is still a good indicator of what people out on the web find to be useful and relevant content, allowing you to find popular content, cluster it by subject, etc...essentially crowd sourcing (a portion of) relevancy via something people do anyways. Gaming was inevitable, and no-follow is really more of a way to disincentivize spammers...the fact that with no-follow you get the spammers anyways (to get human eyeballs instead of crawlers') demonstrates that the motivation is always there. If a search engine trusts wikipedia's outbound links they don't have to obey no-follow in any case, but you still have the situation that everyone will have their own favorite "impartial" external links to add, not to mention people with a vested interest in the subject.
The possibility you forget in your "microsoft can plausibly compete with [google]" point (leaving aside the fact that most people are just ignoring it) was that bing has improved, and that has nothing to do with google breaking anything.