The media is all atwitter at the news that Yahoo! is now seeking a rabbit hole in Rupert Murdoch’s patch rather than get bought by Microsoft – at least not for the ungodly sum of $44.6 billion currently on the table.

What started on the Silicon Alley Insider and TechCrunch blogs has now been picked up by leak central, er, the Wall Street Journal, which, since it’s now owned by News Corp, is fortuitously positioned.

Anyway, Yahoo! and News Corp. are supposedly talking about a joint venture that would see Rupert fold MySpace and some other News Corp. Internet properties into Yahoo – as well as infuse cash – in exchange for a better-than-20% stake in Yahoo, an idea that’s at least as old as last year.

The gating factor is the valuation that would be given MySpace – and hence the size of Rupert’s stake in Yahoo – and the cash infusion could reportedly come from private equity but if the whole thing came off Yahoo would get its nominal independence and Rupert would get a lot more advertising space. What Yahoo stockholders get out of it is unclear.

And to think only last week Rupert was saying that he wasn’t interested in acquiring Yahoo and when asked about the exchange of MySpace for a piece of Yahoo, he said, “I think that day has passed but you never know.” No, you don’t.

Meanwhile, Google, also according to the Journal, has grown leery of the notion of Yahoo subcontracting its search advertising to Google lest the regulators notice Google’s monopoly. So that avenue may be barred to Yahoo.

So far Microsoft is sticking quietly by its observation Monday, after Yahoo officially rejected its offer as undervalued, that the $31-a-share it’s willing to pay is a “full and fair” price. It’s already rattled the saber of an out-and-out hostile takeover.

Yahoo’s second-largest stockholder Legg Mason Capital Management, among others, is pressing Microsoft to up the ante to $40 or better, a price it reportedly offered Yahoo months ago before its stock dropped, while at the same time telling Yahoo it’s got few other alternatives.

The smart money is still betting Microsoft gets Yahoo in the end.

Otherwise, there was a report in the London Times, another Murdoch paper, over the weekend saying Yahoo was talking to AOL about merger.