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I have tried to used Microsoft's search sites over the years but always went back to Google (quite quickly might I add), but recently I changed my default search to Live Search, and am still using in a month later. While Google seems to think their search is basically perfect (i.e. they don't see a need to innovate much anymore), Microsoft is working on actually doing something better. Trying to do a completely different type of advertising model may be something that Google ends up copying.
It's true though, Paul, that Google hasn't seemed to do much with search in a while... at least on the surface. I'm sure they'd argue that tons of things are constantly tweaked behind the scenes. But I wouldn't know.