It smells like a defeat. It LOOKS like a defeat.
What was the State Department's role in this?

Somehow, I just have this feeling that Hizbolah is going to screw it up, i.e. fail to restrain themselves from launching more rockets, shooting at the Isrealies as they retreat/past monday, and Isreal will turn around and say "See?", and go back to kicking their asses. And they know this already.

Gyrglyquor got it spot-on. HZB wasn't expecting the Israeli cabinet to vote for this, much less go for it by a 24-0-1 cabinet vote.

Bottom line: HZB won't be able to put hostilities aside. The fwench, UNIFIL and the Lebanese army collectively won't go into a hot LZ. Israel stays in place until the LZ is cool, and HZB keeps on keeping on.

All this is, is a reprise of UNSC 1441.

Some items from over at PJM:

" Yesterday at the Lebanese Council of Ministers’ meeting the following positions were taken:

* Mohammad Fneish (Minister of Energy, and one of two Hezbollah in the cabinet): The position of Hezbollah is NOT TO DISARM in any part of the country until the Shebaa farms are liberated.

*Fneish then challenged both the Government and Lebanese Army to search and destroy Hezbollah’s weapons by force — ‘If you are men!’

* Michel Sleiman (General of Lebanese Army) stated that the Lebanese Army will not deploy one soldier until Hezbollah agrees to the whole political and deployment schedule.

* Sanioura (Prime Minister of Lebanon) called Berri (Hezbollah representative) who assured him that the position regarding unity has not changed. This prompted the “Unanimity with Reservations” scenario.

The cabinet then gave themselves 24 hours. They were hoping that the Israeli Cabinet would oppose UN Resolution 1701. Then they would blame it on the Israelis. But when the Israeli Cabinet agreed they decided to postpone today’s emergency cabinet meeting to avoid further internal clashes."

Additionally, Bolton said,"“We’re not going back to the status quo ante in Lebanon.”

I'm trying to shake off my initial disgust and hope that perhaps this isn't as bad as it seems.

Hezzbollah isn't going to stop fighting.
The Israelis will respond to any attack, they have already clearly said so.
Perhaps this whole kabuki dance has been to exhaust the UN remedies and with Hezzbollah still fighting, give the Israelis carte blanche to clean them up.
I don't know, just a guess at this point. We'll see in the next couple of days.