Apparently it's all just "purely a rumor, a bit of fiction." At least that's the official word out of Valve. Google meanwhile said they do not comment on rumors or speculation. Valve: Valve Kills Google Buy-Out Rumor G4 - The Feed - Google To Buy Valve?
Somebody just kick EA in the balls already and get them to go ahead and distribute their back catalogue on Steam, just to show them how GOOD it would be for them. Better than Microsoft, EA, or ActiBlizzard buying them though. Google still seems to have some common decency when it swallows smaller bits whole (Youtube anybody?). Valve wins for actually getting digital distribution FIRST, heck they even said they approached Microsoft and company back before they put Steam out saying they had this idea for badass digital distribution and they blew 'em off saying it was years away, now everybody else is trying to play catch up (I'm looking at you EA).