Does someone really believe, 5, I mean 5 (!!!) dumbed down MiG-31 could do anything to stop an US airstrike ?
If we would argue about 50 airframes, with full avionics an corresponding ground facilities, maybe this could be worth some headache.
If I were an Israeli General, I would be very happy, that my potential enemies waste precious resources.

Cheaper than the Gripen? (i.e. total cost of ownership)

No, but initial costs would be lower. Additionally I believe the Gripen is to close to the Tejas.
Give the MiG-29’s already in place a MLU close to the -35 configuration and it makes much sense together with the already exisiting overhaul facilities. (At least in my opinion)

Ok, you like the MiG-29 und Su-27.
But please accept, that MiG as well as Sukhoi went for a canard configuration in their following designs.
And as example for post stall manouvering you could have a look at the X-31.

The Russian designers from MiG also said that they could disregard and eliminate canards if they could get 3D thrust vectoring, both the F-16 and MiG-29 have experimented thrust vectoring with 3D nozzles and they did not use canards

Yeah, and because MiG-engineers find canards crappy, their proposal for a next generation fighter looks that way: http://en.wikipedia.org/wiki/Mikoyan_Project_1.44

Rafale is out because Dassault was unwilling to enter the competition. They learned something from the Korean tender: Offering the best suited product at a fair price does not mean you get the contract.
Why Eurofighter think they have to do all mistakes by themselves is somewhat strange in my opinion.

They buy American anyway, so why wasting time an money ?

I really think we are not able to decide which aircraft is the better one for the USAF.
We don’t know the exact requirenments of the USAF, and we don’t know how much local workshare both designs have to offer.
Is Boeing even capable to keep the 767 line open ? I mean the first 787 deliveries are slated for 2008, and qualified workers don’t grow on trees…

That whole procurement is somehow strange. If I look at your current fleet, then you got a longrange strike aircraft, and a pretty short legged multirole fighter.
Somehow funny to read, that the newer fighter, is somehow plagued with diverse problems, even structural ones.
The concern mostly voiced is, that Australia could loose “local air superiority”.
Well, I would think that a replacement for the smaller aircraft, with a somewhat similar but more modern type would make sense.
Instead the strike aircraft is earmarked for retirenment, because it could become expensive to maintain.
Oh well, I guess reworking the Hornets comes nearly for free, and solves the concern about the “local air superiority”.
Even if the F-111’s get replaced by F-22’s I don’t think your problems are completely solved. While it would solve any air superiority issue, it is no longrange strike aircraft.
In my opinion, the best solution would be to replace the Hornets with an air superiority type now. Let’s say in 2020 the F/B-22 oder -23 could become available, or UCAV’s could offer a solution for your strike needs.
But oh, this would of course collide with the Australian commitment to the Jack of all trades :p