Khaddaffi was about to win this conflict, but due to UN intervention he is simply cornered.
He cannot win this conflict when the opposition is assisted by the VS, France and the UK. Any normal person woud have given up the fight and just have surrendered, but Gaddafi is a madman so his decisions are unpredictable.
I think he's going to do some terrible things before he is defeated; like firing at civil targets, unleashing tons of mustard gas or simply destroy entire rebel-controlled cities. Because he's just not going to give in. He just doesn't want to lose "his" land and power. After roughly 40 years of leadership he is not just going to let the opposition win.
And don't forget that Gaddafi has a giant following and a loyal army unlike the dictators Ben-Ali and Mubarak. Followers of Gaddafi even gathered around airfields and other important strategic points to form a human shield to prevent the UN from bombing those locations. Sick.
But I don't think this is going to escalate to a Third World War. The only countries that openly support Gaddafi are Venezuela and Bolivia. And they they wouldn't dare to oppose against the UN.
A Third World War is only likeable when North Korea is involved. Those people are just bred to hate the VS and everyone who works with them.