You mention imeem, which cooincidently got popular by doing exactly what muxtape did, but they managed to grow from a small site to a large one over a matter of a few months and took on VC money to pay for it. Then when the legal attacks came they were in a strong position to negotiate licensing deals.

Muxtape has a lot of advantages over imeem, it has no filtering so there’s no banned tracks, and no need to pay artists right now so the site isn’t covered in ads and can take on a cool minimalist guise that bloggers seem to love. In fact, if you hit technorati and compare the number of blog posts on imeem vs muxtape you’ll find that the number of articles being posted about each site is rouhgly equal, despite a user disparty of almost 1:100.

muxtape grew very quickly in March and April it’s seen a gradual drop in users since then, so there’s no user growth to show to potential investors. And the fact that they have a whole lot of bonus points over imeem and can’t take any of their users away isn’t help. To become legal they’d have to make changes like imeem and this would only make them less popular.

Oh and to turn this site legal would probably cost tens millions, a big risk for a VC who’d be buying a site with less than 1% of the visitors of the top ranked sites.

So no VC money, no growth in the site, no easy way to go legal results in no good news for the site.

But you’re right about the exit strategy, I believe the muxtape name has some cool factor to it, and this may be their biggest asset. One of the music sites which doesn’t have a brand might team up with muxtape to give themselves some exposure. This might take the form of an acquisition or a partnership.