Taiwan is a special case in international relations, and Washington is wary of selling it anything that might harm its relationship with China. And 66 new F-16s will definitely make Beijing squawk loudly and temporarily freeze bilateral ties.
It will be a tricky decision. Some observers believe that the Obama administration will eventually go ahead and the only question when. Others feel that Washington will only sell Sikorsky UH-60 Blackhawks to Taipei and then sit on its hands for a while.
Taiwan also has some hard decisions to make. Its air force has approved AIDC's upgrades to the F-CK-1 fighter and is waiting for the government to fund the programme. It is also hoping to get mid-life upgrade packages for its F-16A/Bs.
Moving on these would boost Taiwan's air defence capability vis-a-vis China's air force, and buy them time until Washington does make a decision on the F-16C/Ds. Taiwan has to help itself even as the USA thinks about what it can do.