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Maybe they traded them for some diplomatic advantage, like the promise not to arrest or kill Sadr, or something of a more solid nature ? Who are these groups negotiating with, anyway ?

You're assuming that these groups have a centralized command structure. Sure, some of these guy could be characterized as "militia," but I'm betting a good percentage of the guys actually shooting at US soldiers are local hotheads who see this as a chance to stick it to the occupiers. What we're seeing, though, is that a lot of the fair-weather Jihadees are discovering that shooting at Marines is a good way to end up in a shallow grave. It quickly stopped being fun for them and a lot of these guys are simply melting away, back into the civilian population.

I think it's a very real possiblity that the guys who took this truck driver hostage now find themselves in well over their heads. Holding onto the hostage gets more and more dangerous every day, as American troops continue to close in. Killing him would make them all marked men. So, they're trying to save their own skins. Hopefully, they're smart enough to realize that keeping this guy alive is the only way for them to get out of this situation alive.

Possibly...But even isolated groups could think gaining a Western hostage will give them some leverage with the Iraqi or Coalition authorities. Remember the 80s in Lebanon ? The fragmented groups seized Americans, Frenchmen, Englishmen, just so they could negotiate something or over : money, weapons, diplomatic advantages among themselves. Weren't some of the hostages traded from a splinter group to another ?

I concur when you say this could be some act of desperation. They've lost in the guerrilla field, so they freak out and take hostages in some forlorn hope that this will open them a way out. And, as some groups just melt away, they let the hostage loose. But they could also trade them with larger groups, like Hizbollah, getting rid of the problem and scoring some good points within the terrorist "community".