O'Reilly can go into venture funding without compromsing the original source of their cred, which is technical books. It would be much harder for a journalist covering startups.
This is just speculative news. Though, it isn't inconceivable for Mike to take this path. He has, in the past, funded several startups (often unsuccessfully). Moreover, he is a well connected and recognizable individual in this industry; so his background in technology as well as law will certaninly assist him in this respective.
Michael's strength in the online world, however, is also his weakness; TC might risk losing credibility as an unbiased startup blog. It will be like expecting Fox television to provide "fair and unbiased" news :D
I don't see Techcrunch becoming an irrelevant source of startup news just because they have more of their own investments to plug. The bottom line is that Arrington does not need to be objective to remain a good source of news, he just needs to continue doing what he does.
Read his disclosure at the bottom of http://www.techcrunch.com/about-techcrunch/
He's gotten involved with a lot of startups he has profiled and heavily leverages his position to push his investments.