Given that Amazon was founded in Seattle for tax reasons, I suspect Bezos is just as smart as Google in this case.

Yep. I suspect the state's claim won't stand when it's all hashed out, but that'll probably be after the next election...

Amazon will undoubtedly settle. Texas is trying to close a budget short fall for the next cycle that begins in 2011. Amazon has a distribution center in Texas and Texas believes that means they have a nexus of operations. Amazon disagrees. Texas wants/needs money and Amazon certainly doesn't want the court to rule that they are subject to paying sales tax because their distribution constitutes sufficient operations to conclude they do business in Texas. Therefore, my prediction: settlement.

If they settle isn't that admitting they have a nexus in Texas (love saying that) and will have to collect sales tax going forward?

They'd only admitting that settling costs less than winning or losing a lawsuit.

Good way to help the decision for Amazon where the next distribution center will be built, not in Texas. They are already getting jobs and tax revenue from employees there. They should change Texas to Taxes.