The Rare that Microsoft is buying is not the same Rare that produced Blast Corp, Starfox, or any other decent game. They are getting the emaciated skeleton of Rare. This was a great move for Nintendo: they got their last game out of Rare (the surefire hit Starfox), and $375 mil. Excellent deal.
Rare will go on to produce lackluster games for Microsoft, and the Xbox will hang around, painfully dying for the next few years. Microsoft really needs something big on the Xbox. Nintendo can mine gold from mediocre titles like Mario Sunshine, and the PS2's installed base is so great that it doesn't matter what they do: the Xbox is in real trouble as a system. It is unpopular in Japan, and the game lineup is rather lame.
If Rare can help, then the 375 mil is a bargain. However, I tend to see it as MS throwing good money after bad.