Libby screwed up. But it will be interesting to see if he chooses to accept a plea and let the whole thing fade away, or if he decides to milk the situation for all he can in terms of embarrassing Wilson, a man ripe for embarrassment and prone to spouting lies. Wilson on the stand under cross-examination would be delightful indeed.
I feel bad for Libby, but it sounds like (as you state) he screwed up. I'm not sure why he did it. Maybe panicked when faced with tough FBI investigators?
Ultimately, I doubt the public will have much interest over an, until very recently, essentially unknown official (although the press will beat the story to death and then some, and some more...you know the tune). Maybe they could get Gunga-Dan to come out with some memo's about Libby's military service.