Major fighting seems to be over in Mogadishu according to the government. In the past ten days Ethiopian and government forces have been battling militias over the control of two districts (2 out of 16) which were controlled by the militias. There was an earlier bout of fighting which claimed the lives of over a 1000 people (though the government "officially" denies this number). The government claims these were remnants of the Islamic Courts and the media bought into this idea (may because that sounded better!), however these militias weren't Islamic Courts. Both leaders of the Islamic Courts Hasan Dahir Aways and Sharif Ahmed as well as the spokesmen for the militiamen stated that these weren't Islamic Courts militia (though they were sympathetic to the Islamic Courts). The militias were almost all from Habar Gidir, a sub-tribe of Hawiye, it's clear that they didn't oppose the Ethiopian troops only but the government too, they simply didn't want to relinquish control over their areas in Mogadishu. The people behind these militiamen had a lot to lose if there was to be a functioning government in Somalia, from Mogadishu all the way to Kismayo the banana farms and many other resources, some were owned by individuals and the rest by the government, were operated by warlords and militiamen for the past 15 years, they've lost control over these farms since the Somali government together with Ethiopian troops defeated the Islamic Courts.
Militia spokesmen who called themselves "Hawiye elders" tried to justify why these militias were fighting the government by saying they were fighting to liberate the country from the Ethiopians or they were fighting against Darod tribe, however most of Hawiye tribe didn't and fully-support the government. The fact is these militias were killing innocent civilians in Mogadishu for the past 17 years, they opposed every government that came to Mogadishu including the last government formed in Djibouti and led by Abdiqasim Salad.
On the other hand, the government told Mogadishu residents to evacuate the city, then the Ethiopian troops started shelling any area which they were attacked from (it's true that the militias were hiding in populated areas). The US supplied satellite images to Ethiopian troops for the location of the militias, the Ethiopians had to onlyaim and fire.
The government made a grave mistake earlier in not disarming Mogadishu when they first came into the city, Mogadishu clans were ready to give up their weapons in exchange for security. Now, the government is confiscating weapons and doing house-searches. The powerful business community in Mogadishu who posses most of the weapons have made a deal with the government to hand over their weapons, that's a good news.
Meanwhile, hundreds of thousands of refugees (about 350,000) who fled the city are facing food and water shortages. The UN is warning of a catastrophe and the government is asking refugees to return.
There's a reconciliation conference taking place in Mogadishu - which was delayed earlier for security reasons - within two months. If there's tangable results from the conference, which has the support of the international community, then I think there's a real hope for a lasting peace in Somalia. African peacekeeping troops are also on the way, the only issue holding them back now is funding (it was security before).
Much depends on how the government builds its institutions and disarm the capital city.