The DNC Rules and Bylaws Committee decided to seat the entire Florida delegation, with each (regular and superdelegate) to have half a vote.
They also decided to seat the entire Michigan delegation, with each (regular and superdelegate) to have half a vote. In addition, the pledged delegates in Michigan are to be apportioned with 69 delegates for Clinton and 59 for Obama.
According to a source, that puts Obama at 2053 delegates-votes (64 short of the needed amount), and Clinton at 1876.5 delegate-votes. 2117 are needed to win, and there are 86 pledged delegates (from Puerto Rico, Montana, and South Dakota) and 205 super delegates that are as yet undecided.
One of Clinton's supporters on the commitee, Harold Ickes, said that she told him that she planned to continue the fight over the apportionment of Michigan's delegates to the DNC's credentials committee, which decides which delegates are to be admitted at the Democratic National Convention.
I don't believe putting the two delegations at half-strength is the issue, rather, it is that according to the Michigan primary, the delegates should be split up as 73 Clinton delegates and 55 Undeclared delegates. Presumably Clinton would be able to try to woo any of those Undeclared delegates if she so wished.
I would be very surprised if it ended up being anything other than Hilary vs Giuliani. Even with all this home stretch drama in the last few months, I think each party sees those two as the most "electable" and therefore, best candidates.