Why would Garage Games ever be absorbed? Their whole point of existence is to be independent. There'd be no point to it either. Microsoft wants to bank on the independent movement not stop it. They just happen to have the same goals and it doesn't hurt that a lot of the people between GG and MS have been long time industry 'friends'.
Microsoft operates far differently than you think. In it's culture, Garage Games reminds me of Bungie by quite a bit.
On the business front there's no benefit for MS to 'absorb' Garage Games and for Garage Games there's no benefit to being absorbed.
The second paragraph about mutual benefits describes precisely why companies merge in the first place.
Getting noticed by Microsoft usually results in the following chain of events if you're a micro ISV...
1) Market viability is watched while they remain "friendly" to you and watch how well you're doing. Essentially, you're doing the b.a. work for them for free or little cost of support.
2) If the model is viable, they begin parallel development.
3) Analysis is done covertly to determine if you're a threat.
4a) If you're a threat, they outright make an offer for your technology either by purchasing just that piece of it, or acquiring your company. If your software fits well, they may abandon their internal effort and concentrate on that. Or, the buy-out is simply to remove the threat (similarly to how it works with oil companies and plans for fuel efficient vehicles).
4b) If you're not a threat, they'll continue to monitor your progress, but only on the basis of competition analysis.
5) A product mysteriously similar to yours, but fits more solidly into their framework suddenly becomes part of their product line. Sometimes they offer it to the public for free either indefinitely because it is classified as an "add-on" or temporarily as a loss leader.
6) If you haven't been absorbed by Microsoft, your new job is to keep up with the Jones's. Often this results in closing doors.
Of course, there are always exceptions to the rule. Just not many.
The real danger is if GG were to ever become public. The motivation is then to satisfy the shareholders. That doesn't necessarily keep quality at the forefront, and provides a great opportunity for another company (such as Microsoft) to become a highly influential shareholder.
Look at the pattern of other technologies Microsoft has developed or acquired... sql server, exchange, office, dlinq, source safe... All fell into one of the above scenarios. That doesn't mean that Microsoft is evil and must be watched out for, but the reality is, that's how the business works.
Garage Games seriously first and foremost cares about cool games done right and not for the money (although that's a priority also). Microsoft I'm sure wants to see the same thing but if they can do that and make money with hardly any risk at the same time they're going to do it. With so many people making games in their spare time and some people bound to make hits that MS can then release to their player base (with little to no overhead) they're going to do it. Just about anyone in this community right here is capable of making Geometry Wars ... and look at how much money MS made from that one.
Microsoft does development tools. I was recently at a seminar with Scott Guthrie (more or less the father of .Net) and he gave the impression that they are a very well oiled machine. They are pulling no punches on any front that's appropriate for their attention. I'd say game development tools fit into that well. XNA is their first stab at it.
Microsoft's current goal is to sell XBox 360's. As you know, games sell the systems. Indie developers are not the reason for XNA. The reason for XNA is to perform a service similar to that of Garage Games. Target several platforms by leveraging code reuse. You also know as well as I do that a vast majority of Indie developers make (for lack of a more polite term), "crap". That's why you have to subscribe to their developer network to share binaries. This model sells X-Boxes.
Garage Games is a business. The purpose of any business is to make money. And they should! They make great products. However, I'd argue that money is the top priority.
Garage games is the ID software model on a smaller affordable scale with better support: "We made a game with our engine (Tribes 2), and with a little abstraction and tweak, we can financially benefit from the engine itself". The question here is quality. Can Torque measure up to the Doom 3 engine? No. And it's pricing and expectations are in a realm of that reality. Garage Games isn't a cutting edge technology company, and it knows it and it's audience well.
If Torque was on par with FarCry or Doom3, I say their market would be very different.
My speculation was based on merger patterns I've seen and experienced first hand before... nothing more than that.