If the Pentagon had indeed bailed on BD, it is possible that they know that their own research is safely near par or even further along than that of BD. While they would have otherwise funneled money over to GOOG regardless, they possibly tilted the other way as the US government slowly distances themselves from the country's tech industry - that is, until AAPL and others get "on-side" again. Of course, we may never know for sure.
The Pentagon bailed because the bigdog project just wasn't practical[1]. The large version was too noisy for use on the battlefield, and the small version was too weak to do useful work.
It seems like Google are bailing on BD for much the same reason: Their tech works, but it doesn't actually solve any practical problem that Google have, and isn't close to producing any independent, sellable product.
