Hezbollah is, indeed, a state-within-a-state. It's an odd situation - but everything is odd in the Middle East.
From a short, to-the-point piece at Samizdata:Much as I support the idea of a modernist secular Lebanon, perhaps that is simply not within the power of non-Islamists in Lebanon to deliver until military realities have altered the political realities. In short, if the other factions within Lebanon do not want Israel to completely demolish the national infrastructure that Hezbollah also uses, they need to realise that they, as well as Israel, need to declare war on Hezbollah. As long as ports, roads and airfields in Lebanon can be used by Hezbollah, neutrality is simply not an option for anyone.
From another point of view, The People's Cube offers some Progressive Solutions to the Middle East.