Jack Messman, the former CEO of Novell, speaks about Linux and Open Source in the following old video. It is worth mentioning that negotiations with Microsoft only began after Messman stepped down (rather passively).
At the time, Novell argued that Jack Messman’s departure would give priority to Linux. This exemplifies the meaning of the phrase “Better the Devil You Know (Than the One You Don’t Know)“.
Unfortunately, the Novell Ban on Distributing Linux piece of FUD has really caught on and is being repeated ad infinitumaroundtheinternet. The article implies that the FSF is coming together to review the Microvell deal and decide if it is in violation of the GPL, and whether Novell should retain the right to distribute Linux is to be decided in the coming weeks.
Basically, the FSF is closing the loophole exploited by the Microsoft-Novell deal, after which it will be up to Microvell to decide if they wish to comply with the new license terms and conditions. At this time, the FSF is not pursuing the Microvell deal under GPLv2, and apparently they are conceding that the deal is GPLv2 compliant (or at least not worth litigating).
Another point worth mentioning, is that Linux (the kernel) is almost certainly remaining under GPLv2 for the forseeable future, so even if Novell is unable or unwilling to comply with GPLv3, they will still apparently be able to distribute "Linux" under GPLv2 for some time.
So, while Novell will be able to distribute Linux for the forseeable future, it’s the GNU that Novell will be losing if they can’t comply with GPLv3, requiring them to maintain their own forks.