According to the NY Times' City Room blog, things are progressing:
On Thursday, the library said that the hotel chain had “renewed” its commitment to purchase the building, at 20 West 53rd Street, and that the purchase was now scheduled for closing in June 2011. The deal was originally to close in November 2008. When that deadline came, the library and hotel chain negotiated an extension to August 2009, but then the hotel chain suspended payments in February of this year.
Yes, let us reiterate: the purchase is scheduled for closing in 2011. So don't expect to be checkin' into that hotel until much, much later.
That is, as long the vocal Donnell-supporters don't get their way there is a group of former patrons of the library who are urging the NYPL to reopen Donnell (though it doesn't look like that will ever happen, since the NYT is saying the library system can't afford the repairs the branch desperately needs.