I have every confidence Jackson WILL make The Hobbit, at least as a producer.
The first sign was that New Line's head of Marketing, Russell Schwartz, was fired. It was a sure sign that things have gotten desperate at New Line. They badly need a big hit.
The second is that the rights to Hobbit default back to the previous owner fairly soon, and the prior owner has said his choice is Jackson. That put New Line in an impossible position - find someone else good enough, quickly, who is willing to do it knowing that Jackson wants to do it, and who would bring in the box office they need. That's a very short list, and probably already exhausted. Raimi has said in the past that he would not take on the project without Jackson’s blessing. I think Raimi will end up directing, and Jackson producing.
The fact that they are talking about "mending fences", after their previous very public absolutist approach, tells me they have gotten desperate and the battle is probably already won by Jackson. Now it's just a matter of settling the lawsuit on a figure they can both live with.