Re: Michael Bay out of the way!
It wouldn't surprise if this is just some grandstanding by Bay. Something involving a dispute between him and Dreamworks/Paramount where the studio wants TF3 to make the July 2011 release date they set while Bay insists on taking his year-long vacation.
That said, I have mixed thoughts on Bay not returning. I thought that for that most part, TF1 still managed to capture the essence of the franchise despite it flaws. But at the same time things like Optimus Prime not wearing his faceplate most of the the time, not knowing what to do with Soundwave, messing around with Jetfire, and creating the likes of Skids and Mudflap are just a few of the things that make me scratch my head. I just don't think Bay really has the respect for the franchise that any director whose making a movie based on a geek property should have.
As for who I think could replace him, I'm with Timstuff about Louis Lettier. Who has been my first choice since seeing TIH, in case of a situation like this.