Sounds plausible to me, both legally and politically. Here's my conspiratorial addition: commuting but not pardoning means that Bush can hold out the incentive of a potential pardon to Libby for the next 18 months, regardless of whether he gives one in the end. You lose control of an underling by giving him nothing, or by giving him everything he wants - the commutation means you keep control.
I'm not a lawyer, but I have to assume that this means he can still appeal --- which means he can still take the fifth if the congress calls him to to testify. Very convenient.
Update: Marcy Wheeler agrees about the fifth ... and says Bush is obstructing justice:Well, George did it. Made sure that Scooter wouldn't flip rather than do jail time. He commuted Libby's sentence, guaranteeing not only that Libby wouldn't talk, but retaining Libby's right to invoke the Fifth.I hope nobody's expecting the DC press corps to see it that way.
This amounts to nothing less than obstruction of justice.
The Democratic presidential candidates should say they would never issue commutations or pardons outside of the established process, or at least they won't do it for anyone connected to top people in their administration.
(Cross-posted at the John Edwards website.)