The Lede had this on that in their 10:22am post:

Though loyalist forces are using air power daily against the rebels, Colonel Qaddafi seemed in an interview with Turkish television on Wednesday to invite the imposition of a no-flight zone on the country that would ground his air force. He said it would galvanize his support in Libya by making clear that the West wanted to recolonize the country.

"Such a move would be very useful in a way that all Libyan people would then realize that their real intention is to take Libya under control, take people's freedoms away and seize their oil," he said. "Therefore, all Libyan people would take up arms and fight."

But I'd say your guess about a madman's intent is as good as anyone else's.

I'd say the main thing is that he's just trying to keep control of the oil. If he's got that, he's got something real important the rebels have to have. He really believes that he can stay there and rule that country, even with all his money frozen. And as his son said "plan A: live and die in Libya; plan B: live and die in Libya; plan C: live and die in Libya."

I think what we do doesn't matter that much to him. If there's a no fly zone, great, he can use that for propaganda. If not, great too, he'll just keep on keeping on.

There's something else going on that might be related. First, If you go to the full Lede entry for today, you'll see they have rounded up some stuff from allover the web in a couple of posts on a supposed flight of an important messenger from Gaddafi to Egypt today. I also caught this single line at the end of this Arab News article which may be related: Prince Saud also said a decision on a no-fly zone in Libya would be taken by an Arab League meeting on Saturday. I copied the article on notepad a hour or two ago (was collecting a general bunch of Saudi news, thinking of making an entire post of it.) Arab News has changed that article since, it was a lot shorter when I first looked at it, they added a lot more to it, and they took that line out, added things refuting the Fisk allegations, etc.  It may be government censoring, it may not. In any case, the UN could be waiting for that Arab League input, and of course would also be watching what happens in Libya until then.

iIt's Gates/Obama admin and Germany VS. Britain and France, from the above:

• Nato was left paralysed as the US joined Germany in blocking the imposition of a no-fly zone supported by Britain and France. Robert Gates, the US defence secretary, said at a meeting of Nato defence ministers in Brussels that contingency planning for a no-fly zone would continue, before adding "that's the extent of it".

A bit more in this short AP report by Robert Burns and Slobodan Lekic :

Gates told reporters at NATO headquarters in Brussels, following a meeting of alliance defense ministers, that unspecified NATO ships will be moved closer to Libya to be in position in case urgent humanitarian aid to Libyan civilians is required.

But he made clear that NATO is not interested in direct military intervention in Libya unless the U.N. Security Council passes a further resolution granting such authority.

Secretary of State Hillary Rodham Clinton made much the same point in Washington, telling Congress that unilateral military action would have unintended consequences.