There'll be a lot of protests from Brum and Liverpool if we're put forward ahead of them, but in a time of austerity then it'll be down to who needs least government funding. I understand that the Liverpool bid is quite heavily reliant on money for central government. Not sure about Brum - they have a 15K athletics stadium to which it might be possible to add extra seats (probably temporary), while you could hold opening and closing ceremonies at Villa Park.
As for Manchester, you'd have the opening and closing ceremonies at our place, but even if it were technically possible to convert it in a similar way to Hampden, the Hampden conversion out the stadium out of action for football for a year. It didn't matter in that case because Glasgow's major clubs don't play there, but we'll hardly go to Old Trafford for a year.
I suppose we could use the opportunity to build a new stadium, with the current one being converted for the Games and then used by Sale RU afterwards. That wasn't thought viable when considered a few years ago, but if some public money were granted for the conversion, perhaps it might change. However, I thought the point was to keep all MCFC facilities together; with the CFA sited where it is and the recently published Eastlands Regeneration Framework suggesting other plans for the rest of the site, the adjacent locations for another big stadium that might have been available a few years ago now no longer are. This would be a great option for MCFC in my view, but I'm afraid I don't see it happening.
More likely, I think, is that they'd use temporary seating for a new athletics arena, scaling it back after the Games and keeping it as a replacement for the Regional Athletics Arena next to our stadium. However, rather than doing that, I prefer the idea someone proposed above of Liverpool and Manchester sharing the Games. Let Liverpool host athletics (with the stadium then converted to serve as a new ground for Everton if terms can be worked out), while we'll host events they don't have facilities for but we do and thus minimise any drain on the public purse.