First, you have to ask the key question - what is the goal of the exercise? Obviously, if you are going to enforce a no-fly zone over parts or all of Libya, the direct goal is to keep the warplanes on the ground. But there's more in the air than MIGs and Mirages - what about helicopters? Gunships and Slicks - whether Gadhafi is moving troops around or hitting the rebel positions directly, is that part of the no-fly effort? If so, the complexity goes up by orders of magnitude - you need to get down in the weeds, low and slow, to engage helicopters. That's not F-16s, that's very likely other helicopters. But where do you base them?
And the even larger question is about the even larger goal. If your intent is to reduce the ability of the Gadhafi loyalists to fight effectively, then a no-fly zone is nothing but a useless symbolic gesture. The loyalist fighters are winning with artillery and mobility, training and discipline, in which they conduct small - unit armored infantry operations against an untrained and poorly armed opponent. It's really just shock and awe all over again, with the infantry advancing behind armor under rolling artillery barrages and the rebels have no choice but to fall back to the next strongpoint and wait for the next assault. Air power is nothing but a statement in these battles - in no way decisive or even important.
So if the goal is to reduce the effectiveness of the Loyalist counteroffensive, you need to use air, but you need to use it against tanks, artillery and massed troops. And now you're into something much bigger than a no fly zone - now you're in a war.
But there's also the blowback consideration. Bob Gates is right when he points out that a no-fly zone is more than a combat air patrol orbiting above Libya to shoot down any fighters that sortie. No, in order to establish that air power presence, you need to take down Ghadafi's air defense capability. That means targeting radars, launchers and command and control nodes - ground targets scattered throughout the country, in cities and towns and on military bases and at airports. It means killing Libyans - those manning the air defenses and those simply unfortunate enough to be nearby. It may mean bombing airfields and fuel and ordnance depots. And in the end, there are two possibilities. The best one is the rebels come out in charge, and at least some of them will be grateful for the support - but it is a certainty that others will blame the west for another case of imperialist intervention, and use that narrative to drive more anti-American and anti-Western sentiment, with it's accompanying radicalization. The worse outcome would be if Ghadafi's forces prevail in spite of Western Military intervention. Then you face two equally problematic narratives - one of imperialist intervention and another of not enough support for the freedom fighters, which translates into just another case where a brutal dictator was coddled by America and the West, his peoples abandoned to his tender mercies once again. And the whole thing could just settle into a prolonged stalemate, with neither side able to defeat the other. How long are we prepared to enforce the NFZ? What would be the cost of staying versus the cost of walking away? The final, brutal military lesson of the last ten years is "if you can't explain how it ends, you probably shouldn't begin".
In spite of the apparent pointlessness of a no-fly zone, if one is to be put in place, it must be coordinated under the auspices of the African Union and the UN. And it would be best if the aircraft were neither American or Italian - if the Egyptians and the Saudis, along with perhaps the Turks could be convinced to take the lead it would go a long way toward inoculating the West against charges of Imperialist designs on Libyan oil. But the unanswered diplomatic question is simply what would motivate regional power players to actively side with the rebels. It seems unlikely to me.
What would I do? I would recommend the same sort of "highly coercive diplomacy" I advocated in the case of al Bashir's Sudan. A very public one-week deadline to stand down his troops and initiate discussions with the rebel leadership on a power sharing arrangement or transitional government. (Yes, nobody expects him to actually do so in good faith, the idea is to take the pressure off the rebels, allowing them to consolidate in the Benghazi and the west and organize and train and get weapons and funding and begin to build a genuine opposition political movement.) The coercion is that, at the end of the deadline, he loses one national asset per 24 hour day. Palaces, airports, power generation, rail hubs - whatever intel can determine is important to him. Oh, you'll have to carry through - he won't step down because of the threat alone. The idea is that when those around him see their wealth and status being put at risk by his intransigence, they will convince him to step down, one way or another. This action has the same sort of risks of intervention, but the goals and reasons are clear and Gadhafi's options to prevent these attacks are not, on the surface at least, terribly onerous.