An interesting wild card regarding the future of BIF is the December 21, 2005 13G filing by Schultz Investment Advisors indicating that its clients own 21% of BIF.
Assuming the allegations here are correct, it appears that Schultz's main interest in BIF was to use its relative illiquidity to cheat his clients, rather than for its investment merits. My guess is that if Schultz loses clients as a result of this, he will be forced to sell shares, and even if he still has clients left after notifying them of the settlement, he will still be looking to exit his investment in BIF.
This would seem to make it more likely that he would support Phillip Goldstein's efforts to narrow the discount. However, rather than holding onto his shares and voting, Schultz may just sell its stake to either the Horejsi Trust or Phillip Goldstein in a private transaction. All of this is just speculation on my part though.
BIF 1-yr chart: