It will surprise few that in the end they didn't sue.
Cole today links to this Ha'aretz story, implying that the revived psychological-warfare unit referred to might have had something to do with it, which would be silly if it wasn't for these key pars:
"In October 1999, Aluf Benn revealed in Haaretz that members of the unit used the Israeli media to emphasize reports initiated by the unit that it managed to place in the Arab press. He reported that the news reports focused on Iranian and Hezbollah involvement in terror activity.
Psychological warfare officers were in touch with Israeli journalists covering the Arab world, gave them translated articles from Arab papers (which were planted by the IDF) and pressed the Israeli reporters to publish the same news here.
That was meant to strengthen the perception of the Iranian threat in Israeli public opinion."