If published reports are true, the intrigue surrounding the AOL-MSN-Time Warner-Google courtship has reached a conclusion: Google will buy a 5% stake in AOL and remain AOL’s primary source for advertising. MSN becomes the bridesmaid and Yahoo! (who was never seriously in the mix) moves along its separate path of Internet media dominance.

There are many moving parts here:

1. Google may covet AOL’s large base of email and IM users. The conversion process from aol.com addresses to gmail and Google Talk accounts could be relatively easy given Google’s technological savvy. Such a move puts Google on par with Yahoo! And MSN (Hotmail) in the vital path of creating a communications layer that allows users to store, subscribe to and share content.

2. Given AOL.com’s path toward becoming the leading video portal, Google will accelerate its play in the business of extending its ad platform to deliver ads to video clips and Podcasts. This would challenge such players sas Lightningcast and Eyeblaster in this space. Also, it puts pressure on Yahoo! to move quickly to extend its ad platform.

3. This puts AOL’s dial-up business into the spotlight. With this move further down the .com path, what is the company to do with its approximately 19 million dial-up customers? A likely scenario is for AOL to offer its dial-up customers on a discounted basis to Verizon, SBC, etc.. and allow the telcos to offer former dial-up users their “768” DSL service that sells for $14.95 a month. There are some issues here given some of the existing relationships between Yahoo! & MSN with the telcos.

Yahoo! is not likely to respond with anything major. For MSN, in the midst of another reorg which again puts its Portal strategy in play, we’re likely to see an acceleration in its Windows Live efforts to keep pace with its competitors.