I have found, for the most part, the Scooter Libby pardon discussion to be no more interesting than the Scooter Libby trial. To the extent it holds any interest, it is because it will shed some light on the kind of person Dubya is. I can see it going either way for these reasons.
Why He'll Pardon Libby
George W. Bush managed to assemble an amazing impregnable bedrock of support of about 30% of the American electorate. Lying about the war, horribly botching a hurricane, botching the war--none of these things shook the faith of the faithful. All Bush had to do was stand pat and he had 30%. He did two things in the past month that amounted to pulling out a sledgehammer and taking it to the bedrock--his immigration plan, which enraged the nativists (valued supporters, and failing to pardon Libby, which enraged those who were not enraged that he didn't fire Rummy. Pardoning Libby stops the bleeding.
Why He Won't
Bush doesn't mind throwing people under the bus. Libby displeases Bush because he got caught and embarrassed him after all that "I'll fire anyone who leaked the name" business. Yeah, Libby didn't do it, but he brought shame, and for this Bush will let him rot in jail.