I think few if any in the Israeli or Bush administrations expected it to work. But it may have given Israel some high ground in the eyes of the arab world and the europeenies (not that she didn't always have that high ground IMO) in which to facilitate the acceptance of anythign she's having to do now and in the future.
Like I said, just a hypothesis I'm working on.
I think your hypothesis is right on. Israel tried. They gave up territory. It got them nothing. It's just to bad that the majority of the Lebanese don't support Hizzbollah are caught in the middle of the mess. Iran and Syria are the real culprits.