Nope. (According to Throbble. I didn't even know MS was working on a new search engine.)
-420
They weren't. They just purchased one. In fact they purchased two. bing.com and something else can't quite remember...the second one is a fancy wikipedia indexer.
Anyway, no one will take out Google in search unless someone re-invents search, which bing has not done. Google is looking to re-invent email with Wave.