The important lesson here is that the fragmentation of the Syrian political elite that followed Hafez Al Assad’s death might be crucial to understanding what led to where we are today and where both Lebanon and Syria will be going tomorrow. As for his theory on who killed Hariri, I'll post my two cents in the comments.
The current situation in Damascus is intense. I gathered this from meetings with well-connected people and this is my construction. I don't know if it is right but if I were telling the story, this is how I would tell it and how I understand it.
Basically, to understand the Hariri assassination, you have to look at the extension of Lahoud. To understand the extension, you have to look at the years leading up to it.
Back in 2000, Bashar Al Assad was appointed by the Baath Party and security/military institutions because he is weak, in the hope that developing power centers (which emerged in the last years of Hafez Al Assad, whose rule was not as absolute as we are often led to believe) will be able to maintain their stakes in Syrian politics at his expense. This does not, however, indicate that he was powerless. His strategy was to appoint Syrian technocrats from abroad like Essam Zaim (who was snatched from the IMF, put in charge of State Planning and then moved to the Ministry of Industry before being out under house arrest after a confrontation with Prime Minister Mustafa Miro over a corruption scandal) and Ghassan Al Rifai (former minister of economy and trade before being kicked out.)
Because of their lack of expertise in the political arena, both of the above were dealt with and marginalized. Others such as Head of State Planning Commission Abdullah Dardari remain in their posts but are constrained and encircled. Bashar felt this approach is futile. Bashar also noticed that there were the Israeli and Iraq/US threats that needed to be dealt with. The US, for its part, was constantly baiting Bashar to "prove" his leadership. Bashar was trying to but unable to successfully marginalize the Baath old guard or security services. Basically, things were going too slow.
At the same time, two networks of corruption run from Damascus to Beirut. One is headed by Hariri and is connected to Syrian Vice President Abdel Halim Khaddam, former Head of Political Security and now Minister of Interior Ghazi Kanaan (who ran the Lebanon dossier between 1980 and 2000) and others. The networkother is headed by Lebanese President Emile Lahoud (with Bashar, his younger brother Maher Al Assad and his cousin Rami Makhlouf among others).
These two networks compete with one another for at least 20% of the Syrian economy (but some estimate as much as 40%). Bashar feels that if he controls that network, he can make moves internally and consolidate. Lahoud is viewed as necessary. Other pro-Syrian Lebanese like former Foreign Minister Jean Obeid or Minister of Interior Suleiman Frangieh simply do not have the economic pull, control of corruption networks, or the links to security and military to check Hariri. So the decision to use Lahoud is not for the sake of economic gain through him per say, but to hit at or target Hariri's network.
It is also an enormous miscalculation. Bashar, likely prodded by his family, failed to compute Hariri's links to France and Saudi Arabia. Indeed, there seems to be a feeler that by going after Hariri, it can make room for Walid bin Talal to replace Hariri which would give Bashar control over the economic networks in Syria and Lebanon.
So they extend Lahoud’s presidential mandate and do so in a crude way that pisses Hariri off. He resigns and goes to Paris. Chirac is pissed and Hariri returns to Beirut via Damascus. He meets with Bashar and it does not go well. The message from France is that relations could be threatened. Instead of reacting positively, Bashar again miscalculates. After continuing to go after Hariri unsuccessfully (with him potentially being an obstacle - be it active or passive), witnessing the UN resolution 1559 and appointing people like Walid Al Muallim as deputy foreign minister handling Lebanon over Foreign Minister Farouk Al Sharaa's head, the situation gets more perilous. This feeds into further desperation and bad choices.
Now, no one suggested to me that Bashar ordered the hit. But many think that, at least, Maher was involved. They thought by ridding themselves of Hariri that there would be a problem but that it would blow over and they could establish their dominance over the economic links through Lahoud. Now, Asif Shawqat (search "shawqat" on the link), the head of Military Intelligence, Maher has been removed from the Republican Guard to watch Shawqat's movements. Someone named Nukkari (now head of RG and loyal to Bashar) and Ali Younis (a big deal in the Alawi community, also loyal to Bashar) is head of the Struggle Companies (Sarayit al-Sara`a). This indicates that the confession is still backing Bashar through the security services.
We know what happened next. The world has lined up against them. Khaddam is openly saying that he has nothing to do with the situation in Lebanon, the Saudi family (the side connected to Hariri) is livid, as are the French. The Egyptians are doing the US’ bidding. So why not pull out? Because if they pull out now and Lahoud falls (a likely possibility), they will lose Lebanon completely. If they stay they can keep some who influence on what comes next and the Assads can make sure they are in charge of economic developments. This is where we stand now and I think what accounts for their lack of withdrawing to date (despite the pressure) -- it is about controlling change.
People in Damascus are pissed. Politics is openly discussed in restaurants and cafes. People feel scared and fearful of what comes next. The fatalism is frightening. Many think a military strike is coming (if not immediately then in a year). They want leadership from Bashar and he is not delivering. The stalemate in Lebanon is making for a blocked atmosphere at home. Many think Bashar wants to do a Baath Party congress to purge the older elements but can only do so if he is in control in Lebanon. People are running to Chatura (a Lebanese city right on the border on the Baalbek-Damascus road where many Syrians do their banking) daily to rearrange their finances. People believe in Iraq and Palestine as causes of the current situation, but not so much Lebanon. Not many benefited and it is seen as the bane of the regime. There is a feeling that Lebanon was always related to Syria (even before the Lebanese civil war). No Lebanese president ever went against at least a tacit “Blessing of Damascus.” Now, they are screaming "Syria Out!" and one Lebanese opposition MP called for doing a "Civilizing Mission" in Syria. So you can imagine how this is going over among proud citizens. Bashar is being blamed locally but there is no substantial mobilized opposition force. No “People Power” in the Sham to speak of at this point. This is complicating the stalemate domestically there.
The exit from Lebanon is inevitable but it is how they go. Either they leave still possessing some influence (some sort of corruption network under Bashar faction's control) or they leave in retreat. If it is the latter, forget the peace process. Also, by closing Lebanon, Syria must open. Many feel that the regime will start exhibiting Saddam-like tendencies if pushed in this direction. Based on my feeling, Bashar is leaning back on the sect -- it is somehow more important at the moment than the other branch of how things are getting done. The place is not acting like a state at the moment.
It is a really a damned mess. Bashar screwed things up but I feel it was the situation before the Lahoud extension that led to the miscalculation. He is more powerful than he was a year ago (but he is also now more isolated). People see his miscalculation as a lack of intelligence, ill preparedness before ascending to power, and naivety. It definitely was not well thought out and went against the advice of Kanaan and Khaddam (Bashar might of thought they were trying to dissuade him for personal rather than professional reasons).
The Syrians will pull out of Lebanon and but only if they will be able to maintain their influence there. To completely lose Lebanon is likely regime-threatening. Indeed, as soon as Bashar feels like his economic road (and the only economic road) is open to Beirut, he will bring the troops home. When that happens, watch for a Party congress to convene to target the party's older elements.
It will go down as one of the more awkward consolidations in recent memory in the Arab world.