Having taken a little while to digest the announcement, I think I can safely say that Paizo's probably in a pretty solid place.
By doing this, they have another year to decide if 4E is appropriate to their styles and wants, and to study sales figures and patterns via their partnership with Necromancer. In the interim, they can keep publishing a successful line of adventures, and tap into the market of people who are reluctant to switch.
Now, here's the kicker. If they had said "This is our permanent decision," I'd agree it was a really bad idea. But if they intend to base their business model off of Pathfinder for, say, a year or two, and then reconsider conversion, it may not be a bad model.
And I don't think WotC would have any impetus to try to "stop" them, even if they could. As someone else said, there are already other competing systems. (Hackmaster, for instance.) I don't think this is going to hurt 4E in any way, and it may--if handled right--turn out to be a "best of both worlds" circumstance for Paizo.