Both campaigns have denied the reports. The story originated from a leak in the Obama camp.
Why would Richardson choose Obama? Strategy for the long-run. While Richardson is a long-time political ally of the Clintons, and support for Hillary Clinton would go a long way toward ensuring a nomination for Vice President (he is rumored to be Clinton's top choice), Richardson and the senator have opposite views on Iraq, which is the governor's main issue. John Edwards aligns most closely with Richardson on Iraq, but it's possible that the governor does not see Edwards as a viable long-term candidate--Edwards is far behind Obama and Clinton in most other state polls. By supporting Obama, whose views on Iraq resemble Richardson's, the governor could be establishing some good will for the future, if Obama is indeed the nominee. It's unlikely that he'd be Obama's VP choice (two minorities on one ticket could not fly), but he could ensure a high level cabinet position: State, Defense, etc.
Dennis Kucinich has already directed his voters to the Obama camp. In 2004, Kucinich's support of Edwards went a long way toward ensuring the senator's second place finish. With two candidates backing--and possibly a third's, depending on which way Joe Biden swings--and a lead in the poll, Obama has a very good chance of winning Iowa and gaining serious momentum for the later states.