I asked a friend in Baghdad if things are as bad as they seem from here. Here's what that friend replied:

It's bad. The mortar attacks in the Green Zone are as intense as I can remember (and, smart guy that I am, I picked Wednesday and Thursday to spend hours in the Green Zone). And it's not a good sign that the Americans have fought with the Mahdi Army in Sadr City. Rumor has it the U.S. military has canceled embeds and is much more involved in the fighting in East Baghdad than they’re letting on.

That said, it looks like the cease-fire's mostly holding, because if it truly disintegrates things in Baghdad will be A LOT worse (much more street fighting, a lot more EFPs and rocket attacks, etc.). I think it all depends on whether the Basra fighting drags on for a while or wraps up.

My complete guess is that it will wrap up sooner rather than later, because the militias will make the same decision Sunni insurgents made over and over again, and just fade into the crowd after putting up some resistance. Their power in the south is as much political as military; I don't necessarily think that Maliki planting a flag in the center of town will really change things in the long-term. So I guess I'm anticipating something close to the "best-case scenario" -- which, this being Iraq, pretty much means that a lot of people will die and things won't change, as opposed to a lot of people dying just to make things worse than they were before. That said, I think I'm more optimistic about this than a lot of people.

Also, the link above is to a fantastic piece of journalism -- no, not mine, silly, Sudarsan Raghavan's. Raghavan spent the day with some JAMmies and reports:

Suddenly, they heard mortar rounds being launched outside with a boom like the sound of a wrecking ball.

"This is to the Green Zone," said Kabi. "These are gifts to Maliki's government."

He and Abu Moussa al-Sadr both work for Iraq's Ministry of Interior, which runs the police and is widely viewed as infiltrated by the Mahdi Army. They said that many police officers had defected from the government and were now fighting with the Mahdi Army.