The deal would be in stock, not cash, and so is more a reflection of the value of MySpace to Yahoo, not the value of MySpace to everyone using the dollar as a standard. If MySpace is lined up to be trounced by Facebook, then I would imagine that Yahoo has some reason to be concerned as well (their problems are showing more and more through the seams). Remember when Google bought YouTube and within a couple of days the increase in Google stock price paid for the acquisition cost? Perhaps MySpace is indeed this valuable to Yahoo.

the people at Yahoo! must have smoked quite some pot...

they paid 2 billion dollars for geocities back when money had no value, and they are ready to throw away as much as 11 billion for MySpace - which, btw, is getting and will get hammered by Facebook.