Is the W3C Validation important for SEO?! Also ... is it an implemented in the Google/Yahoo/MSN ranking algortim?!
I don't believe it's that important for SEO. No, none of the search engines 'depend' on the 'validation' of your site. That's simply for ego I think and for browser compliancy (which IE does not follow, of course). By default, a site will look good in Opera/FF if it's validated, while often it will look out of whack, while sometimes fun, if it's not validated. There's no big difference to being validated or not though. I validate nearly all my sites just because it's habit and I like them being validated.
True, IE do not follow some css rules and Firefox is buggy particularly with height 100% and width 100% or auto if you do not use it as fixed size or "min-width" :O but the fact is that you may waste lots of time trying to make your site cross browser compliant to find that it validates... until you add content that make your design not validating again, particularly after include Adsense and other javascript content and/or flash content. I try to keep certain cross browser compatibility on my sites but not longer wasting time. Instead of CSS design, optimize keywords, content and so on
I think that Google should check W3C. I don't know if they do or not, but if they do then they it isn't a very important factor.