Rome's four options in regard to Bp. Fernando Lugo
The issue here is canonical (and by implication, theological and pastoral): Lugo was ordained to the fullness of holy orders for the spiritual service of God's people. By all accounts, he was doing good work in that task when, at some point (and it does not appear to have been very long ago), he saw an opportunity to substitute another good (and yes, serving the people in civil office is a good) for the one he originally accepted. The new good that Lugo is pursuing, however, civil governance, is not only incompatible with his many duties as bishop, it is flatly prohibited to clerics (c. 285.3). But Lugo took it notwithstanding.
To his credit, Lugo attempted to give up his clerical status by petitioning a return to the lay state. But, to its credit, Rome said no, observing that clerical status at the episcopal level is not something that can be surrendered. Lugo refused to stand down for election, but even then Rome did not respond with its heaviest censure, excommunication; instead, Rome suspended Lugo from ministry, leaving his status as a member of the clergy intact. For now.
The recent apology from Lugo (again he seems to be desirous of minimizing the ecclesiastical harm his actions have caused) is not yet sufficient for this problem, though a superficial reading of Canon 1347.2 might suggest otherwise: Lugo's apology amounts to "I am truly sorry that I have caused scandal by gravely violating ecclesiastical law; I will continue to violate it." That, folks, is simply not an apology. However "sincerely" it is said.
So Rome has, as I see it, four options here.
1. Excommunicate Lugo (there are a couple-three ways that could come about on these facts), and leave him in the same state as a Milingo. Except that Lugo is clearly not a Milingo.
2. Lift the penalty of suspension (in recognition of Lugo's sincere desire to avoid harming others), impose a salutary penance under Canons 1339-1340 for his actions inconsistent with Canon 285.3 (invoking if necessary c. 1399), and dismiss Lugo from the clerical state ex offico (and not as a favor that one can request).
3. Dispense Lugo from c. 285.3 (it is subject to dispensation and a case for that under cc. 85, 88, 90 can be argued here). Then live with the consequences that such a precedent (in life, not in law, per c. 16.3) will unavoidably establish for a long, long time.
4. Do nothing, and hope that Lugo will resign the presidency (yeah, right), or do nothing till his term expires and then "reconcile" him (which will send a strong message that Canon 285 is pointless), or just do nothing, period.
No one wants option # 1 (though it is on the table). I think # 2 is the prudent choice, but my guess is that Rome is looking hard at # 3, despite a chronic curialista predilection to follow # 4. As I've had occasion to say before, I'm glad it's not my call to make.
In the meantime, though, I can't help noticing that Lugo's political career is being launched by doing what politicians do best: disregarding one promise in order to make another. Too bad. He seems a better man than that. +++
Note: See also this Rite of Dismissal for a Bishop from the 1895 Roman Pontifical, and my comments in "Permission given to priest to run for political office", 2007 CLSA Advisory Opinions 60-62.
Update 05 May 2008: A thoughtful look at the issues from NCReps' John Allen.
Update 30 July 2008: Rome granted Lugo's request to return to the lay state.