Microsoft had tons of legal issues over crushing Netscape, but Netscape stayed crushed. Microsoft was wounded, but it would rather be fined and saddled with weakly-enforced consent decrees than risk real competition.
Besides, Microsoft could use its monopoly in lots of smaller ways to screw with Google. What would happen, for example, if IIS servers produced pages that messed with Google's indexer? Nothing major, just made it get things wrong, or miss keywords. Or if Internet Explorer could still access Google... but was really slow for some reason, and hard to use? Or if Windows Update started changing the default search to Bing on all different browsers?
And that's just the underhanded stuff. Microsoft loves wedging one product into another - how much you want to bet that an upcoming version of Office has convenient little hooks into Bing, to let you do searches from inside documents? Or they release a pared-down version of it with Bing-driven ads? Or buy the Encyclopedia Britannica, lump it in with Encarta with a Bing interface, and make an assault on Google + Wikipedia?