In my opinion, Federal Government should bail the Big Three out- but at a (heavy?) price: in return for billions our our dollars, it is my belief that the companies should be forced to meet certain benchmarks, such as in fuel economy (over 35 MPG by 2010-12 would be reasonable, no?).
At any rate, I disagree with letting them fall flat on their faces (the executives/companies): doing so might be highly detrimental to the poor-dealings of our current economy.
If my calculations are correct (information on employees comes from Wikipedia), the Big Three employee a little under 500,000 people. Imagine all of them becoming jobless in the next few months, and the impact on the economy.