I really don’t think we have to worry about MSN dropping gambling-related ads because of outside pressure.
MSN is owned by Microsoft, and they have a strong history of flipping the finger to anyone who tries to take any of their market share.
My guess is that MSN will sieze this opportunity as the gift it is and take as much of the gambling ppc market as they can get – and then some. They’re just now positioning themselves to sweep the search engine world with new software.
If the government decides to take them to court they’ll have a tough fight on their hands.
As for google, I don’t think they’ll cave either. Maybe they’ll modify the .com ads, but they have geographically targeted search sites such as google.ca, so a complete black-out of casino ads seems unlikely.
Judging by my yahoo search for porn sites, Yahoo seems to have ethics about their ppc that the others aren’t constricted by.