Michael Martinez and I are discussing this very subject - but NOT this same topic on usernames - here is what he says on phrases and having checked it out I tend to agree.
Live is displaying weird results. Here is a quick "phrased-based indexing" test that tells you whether a search engine may be indexing by phrase. Search on:
http://search.live.com/results.aspx?...n-US&form=QBRE
http://search.live.com/results.aspx?...go.x=12&go.y=9
If you see similar results, the engine is NOT indexing by phrase. I would say that there is insufficient evidence in these search results to support the "phrase-based indexing" point of view. However, one typo in the reverse expression query produces null results:
http://search.live.com/results.aspx?...n-US&form=QBRE
That could be an indication of phrase-based indexing. But Microsoft uses an artificial intelligence (or so they say) so their indexing methodology should differ from traditional indexing. If you try the reversed query test in Google:
http://www.google.com/search?hl=en&q...=Google+Search
http://www.google.com/search?hl=en&q...ts&btnG=Search
You get virtually the same results, and if you introduce the typo:
http://www.google.com/search?hl=en&q...+right+Tenants
So Google is clearly NOT indexing by phrase.
An AI system might actually be more inclined to index phrases on the basis of aggregate query analysis without actually having to favor phrase-based indexing schema. It would discern a pattern and create a rule to look for phrases of particular structure.
Google's proximity- and frequency-based relevance rankings clearly don't incorporate phrase-based indexing at this point.