According to sources close to the situation, AOL has been busy selecting the board for the company, which is still set to spin itself off by year’s end–even as it slows down a decision on a new search deal with either current partner Google or a more emboldened Microsoft.

AOL is using Spencer Stuart in the search for directors, led by well-known headhunter Jim Citrin, sources said, and the company has already settled on several outside candidates.

The final board is likely to have about 10 members, and up to a dozen.

At least one of those seats will go to CEO Tim Armstrong, with one or two more claimed by its current corporate owner, Time Warner (TWX).

AOL and Time Warner made their own wish list of potential directors earlier this year, but some people are also lobbying the company to join the board.

BoomTown is working on discovering all those names, but sources added that the candidates being looked at are a mix of personalities culled from the media, advertising and Web worlds.

Among the key attributes: More presumably fast-forward and innovative Silicon Valley types that can help burnish AOL’s tarnished tech cred.

Here are some of my picks:

Facebook COO Sheryl Sandberg, Guitar Hero CEO Dan Rosensweig, WordPress founder Matt Mullenweg (actually, AOL should buy the start-up), eBay (EBAY) CEO John Donahoe, LinkedIn Chairman Reid Hoffman or CEO Jeff Weiner, Juniper Networks (JNPR) CEO Kevin Johnson, Netflix (NFLX) CEO Reed Hastings, and former AOL iconic exec Ted Leonsis.

And, just for fun, News Corp. (NWS) digital don (and ousted former AOL head) Jon Miller or former Yahoo President Sue Decker.

(I might also add former AOL exec, Netscape co-founder and all-around entrepreneur Marc Andreessen, but if he joins another tech/Web board, he is going to get splinters.)

That’s because Armstrong has set a strategy centered around the turbocharging of online content, powered by a more flexible platform and paid for by goosing AOL’s graphical advertising business.

This puts the online icon–once a powerhouse and now not so much, having operated inside Time Warner since its merger early in this decade–in more serious competition with Yahoo (YHOO).

Yahoo now dominates content on the Web, with powerful news, sports and finance sites, and has recently been trying to reinvigorate its brand. This week, it launched a new marketing campaign with the motto, “It’s Y!ou.”

Yahoo also recently struck a search technology and advertising partnership with Microsoft (MSFT), which has now aimed its efforts at AOL.

According to sources, Microsoft execs have been aggressively courting AOL to switch its search business from Google (GOOG).

The search behemoth has long been AOL’s partner in what sources at both companies said has been a productive and lucrative relationship.

Armstrong is also a former top exec at Google, which many at the company hope will further cement its chances.

And while the renewal of that deal does not officially need to be struck until late next year, sources add that Google has already prepared and offered what it considers an attractive new deal for AOL.

But, much to Google’s chagrin, with a focus on the spinoff and preparations for some more cost-cutting in the months ahead, AOL has decided not to accept it yet and is not likely to anytime soon.

While hedging the situation in a recent video interview with MediaMemo’s Peter Kafka, Armstrong has also recently met with Microsoft execs, sources said, who have discussed a number of partnership options with him, including a tighter relationship with its MSN content properties.

“There’s no need to rush, especially since there is already a lot on AOL’s plate,” said one source close to the situation. “And, since it has options, AOL is going to take time considering them.”

(For more on Armstrong’s thinking, here’s a link to another video interview I did with Armstrong while both of us were in Germany today, in which he talked about the ad market and AOL’s strategy, but was cagey about being more specific.)

Please see this disclosure related to me and Google.

Burda runs an annual digital conference in Munich called DLD (Digital, Life, Design), which a lot of U.S. tech types have gone to, including me, even though the media giant is best known for its old-line magazines about fashion, cooking and crafts.

But Burda has also been dipping into the digital sector a lot, especially via the tireless tech networking of the company’s Steffi Czerny and Marcel Reichart, who have established a high profile for the company among Silicon Valley denizens.

That was in evidence at Burda’s luncheon yesterday, which was crowded with a panoply of techies and hosted by Czerny, Maria Burda, the wife of CEO and owner Hubert Burda, and well-known Israeli investor Yossi Vardi.

Czerny has been taking Maria Burda (pictured here, she is also a famous German television star, better known as Maria Furtwängler) around the Valley on a learning tour this week to meet with companies like Ning, Mozilla, Facebook, and with venture capitalists. They are also here to attend Google’s Zeitgeist partners’ event, which starts today.

Here’s a video of yesterday’s luncheon, where I was asking everyone about the troubled economic situation and more.

It includes chats with Mullenweg and Seesmic’s Loic Le Meur, BillShrink’s Peter Pham, Facebook’s Brandee Barker and Randi Zuckerberg, Wired’s Steven Levy, Vardi and Burda and Czerny:

This week, I had lunch with one of the nicest young Web entrepreneurs around the scene, WordPress Founder Matt Mullenweg.

We use a custom WordPress.com installation for this site, which has worked out well for us, and the start-up also hosts AllThingsD.com. We also got a very nice hoodie.

In all seriousness, the company started as an open-source blogging software project at WordPress.org with Mullenweg as founding developer, while WordPress.com is for-profit and is run by Mullenweg and others at a start-up called Automattic.

Mullenweg came to San Francisco from his hometown of Houston to work on WordPress and other projects for CNET in 2004. He left a year later to work full-time on the development of WordPress.

It and others like it quickly rode the wave of an ever-growing trend of self-publishing, which has been increasingly embraced by both the single person writing about their cat to the large-scale media companies looking to develop more dynamic properties online.

WordPress and Automattic (which also runs Akismet, an anti-comment and trackback spam software service) has been the frequent target of takeover speculation.

But, while Automattic has reportedly considered those options, as well as hooking up with other companies like Sphere (which was just bought for $35 million in cash by AOL [TWX]), Mullenweg seems just as determined to build out his simple publishing platform, by adding ad networks and all sorts of bells and whistles to the offerings.

In fact, WordPress competitor Six Apart did just that last week with its acquisition of the New York-based ad, design and consulting services firm Apperceptive.

So I will bet Mullenweg probably has some news of his own, when he gives a short speech at the Web 2.0 Expo in San Francisco this morning.

We’ll see, but in this video, Mullenweg talks with BoomTown–after we admit to an obvious man crush on him–about the progress in the blog-publishing arena and where it is all going.

Here’s the video: