The Kaddafi clan have adapted to the presence of NATO air power, and believe that they can survive, and even defeat, the rebels. The initial shock of the uprising has also worn off, and the Kaddafis now realize that exile will be difficult (too many countries want to nail them for past crimes), and that the Libyan rebels are not strong enough to take control of the western part of the country, or at least the country's largest city, Tripoli. However, long term, some kind of deal has to be worked out. That's because the rebels will gain control of the oil fields and pipelines, and the Kaddafi family has had most of its money declared stolen (from Libya) goods and foreign bank accounts have been frozen. The Kaddafis, like tyrants everywhere, kept a lot of cash handy (as much as a few billion dollars worth). That would be sufficient to meet the payroll (for gunmen, torturers, bodyguards, servants and spies) needed to run Tripoli (and 1-2 million loyal, or simply trapped, Libyans) for a year or so. The way this works, the UN can be persuaded to send in humanitarian supplies (food and medicine) to take care of the majority of those in Tripoli, while the needed luxuries (to keep the leadership content) can be smuggled in from Algeria (which is also run by a dictatorship that is unsure of its longevity.) But, long term, Kaddafi needs cash to survive.
Helping the rebels defeat Kaddafi forces, and capture Tripoli, is very difficult. Even by Arab standards, Libyans are terrible soldiers. Heavily armed Libyan troops were once defeated by Chadian tribesmen riding around in pickup trucks, using light weapons against Libyan armored vehicles. What was most humiliating about this was that the Chadians were not considered Arabs, but sub-Saharan Africans (who are considered even less effective soldiers than Arabs.) But in this case, the Chadians were better organized and better at what they were doing, and sent the surviving Libyan troops fleeing north.
The military ineptitude is a cultural thing. Arabs moving to the West, and joining the military there, perform as well as anyone. But back in the Old Country, putting together an effective fighting force (that needs discipline, lots of dill and training, and leaders who will lead, follow orders and do what has to be done) is very difficult. In Iraq and Afghanistan, it took years to find men who could handle the training and responsibilities. Eventually, combat units, that American troops felt confident to work with under fire, emerged. But in Libya, the locals and foreigners would like a solution within months, or less. Moreover, NATO is reluctant to put their people on the ground, although that is secretly happening more and more. Several nations have admitted they have intelligence operatives (CIA, MI6, etc) on the ground. However, when the CIA goes into situations like this, each group (usually a pair) of CIA people are accompanied by 6-12 U.S. Army Special Forces, often wearing civilian clothes. The Special Forces often have better local language and cultural knowledge skills than the CIA people (who are sometimes former/retired Special Forces) and operate more as equals than armed escorts. This kind of cooperation has been around since the CIA and Special Forces were both created, after World War II, from the same organization (the OSS, or Office of Strategic Services). The common origin created links that have remained strong ever since. It's useful for the army, giving the generals an edge when it comes to getting something out of the CIA.
In Libya, having Special Forces and CIA personnel down there makes it possible to train Libyan rebels, as well as negotiate with the rebel leaders. The problem is that the rebels are divided into many factions, and have only been united (most of the time) the past few months because the Kaddafi forces were close to killing all of them several times. But with NATO air power, and help organizing more effective military units, the immediate danger is gone. The factional differences will assert themselves. Many Libya experts believe that this is just the first stage of a multi-act civil war. Prospects for a quick and lasting peace are not good.
Rebel efforts to ship oil were halted when warplanes bombed the pipeline that took the oil from the oil fields deep in the desert, to the coastal shipping facilities. Kaddafi said the warplanes were British, but they were probably Libyan. It's safer for the few remaining Libyan aircraft to fly inland, where the pipelines are, and possibly avoid being spotted by the AWACS (large radar aircraft) and fighter patrols used to enforce the no-fly zone.
Rebel leaders are now criticizing NATO for not doing enough to help defeat Kaddafi and protect the Libyan people. The U.S. was also criticized for withdrawing its warplanes. NATO is finding its bombing missions more difficult because Kaddafi forces are increasingly using civilians, especially women and children, as human shields for the movement of military vehicles, or to prevent military bases from being bombed. Some rebel leaders insist that the Kaddafi gunmen be attacked, despite the human shields. So far, NATO lawyers won't go along with that.
The human shields are particularly useful in cities like Misarata, which is 210 kilometers east of Tripoli and has a population of 550,000. This is the third largest city (after 1.1 million Tripoli and 671,000 in Benghazi) in Libya. Despite its proximity to Tripoli, government forces were never able to take Misarata. However, Misarata has been under siege for more than a month, and that includes many Kaddafi gunmen inside the city.
Kaddafi troops still have some armored vehicles inside cities like Misarata, which are rolled out when thought safe (from attack) to attack rebel positions, or key sites like hospitals. Kaddafi has his secret police and street gangs in many cities in towns, who are able to harass the rebels, or even defeat them in some places. Kaddafi has cash and lots of promises to give out, and many Libyans with guns listen.
Kaddafi has been sending representatives to European capitals, to try and work out peace deals. He prefers this to trying to negotiate with the rebels. Kaddafi considers the rebels to be ungrateful wretches, after all the Kaddafi family has done for Libya in the last four decades. Kaddafi is more comfortable dealing with foreign governments, who tend to be more polite than the ungrateful Libyans.
April 6, 2011: Rebels regained control of the oil port of Brega.
April 4, 2011: Rebels entered the outskirts of the oil port of Brega. U.S. warplanes cease operations over Libya. Support aircraft remain. NATO runs the show, and European nations supply most of the warplanes.
April 1, 2011: A rebel column was attacked by NATO warplanes after an anti-aircraft gun mounted on one of the rebel vehicles opened fire on a NATO aircraft overhead. The NATO pilot took that as proof that the column below was actually pro-Kaddafi and subject to attack. The anti-aircraft gunner was simply firing into the air to celebrate a recent rebel gain. Firing guns into the air is a common form of celebration throughout the Arab world. Once this was all sorted out, the rebels apologized to NATO and admonished its men to not fire in the air.
The rebels avoided a violent split in their fighting forces when a dispute, over which of two military men would be leader of the rebel troops, was settled.