Good question. I doubt that the cost in loss of goodwill exceeds potential revenue in China. Which in turn means that there might be something else at play. Does Google want to play hardball with China? Is it concerned that the external costs of doing business in China (exposed servers, lots of red tape, etc) outweighs the revenue it gets from being available in China?

Either which way, I'm going to follow this. I doubt that much will change - but the various exchanges and discussions that come up around this should make for a good read.