I agree that this is probably going to backfire spectacularly but if we give the proponents the benefit of the doubt it could be argued that while the big G might not care about Google News, users may. If these news aggregator shutdown they will look for alternatives which might create an opportunity for people to develop news aggregator that share the revenue more fairly with the newspapers. I doubt this is going to happen but I suppose it might sound right for people who are not deeply familiar with the way the internet works.

> it sounded like they would explicitly forbid this sort of arrangement between publishers and aggregators

and than, should they force google to pay instead of cutting these publishers off? in no way would that be legal. you can't force somebody to pay something, by forcing them to obey.