http://www.bbc.co.uk/news/correspondents/robertpeston/Robert Pestons done some pretty extensive coverage of this story, and he is usually a pretty good analyist.
I doubt this scandle will damage Murdock much. He has been in this business a while and has survival skills. The big fishes are Coulson and Brooks. If Coulson is found guilty of anything in court it will seriously damage our PM, Camerons crediblity as he hired him, especially if he is some how connected with either the Milly case, or the soldier cases as these are very pollitically sensetive. Because Cameron can only loose from this investigation (he gets along with the Murdock press quite well) i doubt he will be putting all his effort into seeing it is carried out. Equally if he tries to slow its progress or is accused of slowing its progress he will be hurt just as much.
Legally speaking (i am no UK legal expert but i have a basic understanding of our laws) the police will have to find solid evidence (they will be going head to head with Murdocks legion of lawyers) that A; either of them either lied to the police at some point (this is quite possible im my view), B; Were activly involved in either authorising or organising, or telling other staff to engage in illegal activities. Phone tapping is illegal (but it didnt use to be, i cant remember when it became illegal, but i remember it being in the news when i was alot younger, perhaps i remembering 2003ish). Buying information off the police is more grey. Im not sure whether it is illegal. I expect it would depend on the nature of the information gathered. I know that the police do sell information to security consultancies regularly in the UK and that this isn't illegal (or at least if it isnt its a law no one cares about). However we do have what i known in the UK as the data protection act, which makes it illegal to share private information without the subjects consent. The police in the UK are infamously bad at prosecuting their own. If its just a street boby officer or some low ranking detective they might be sacrificed to the public, but if it goes higher up the chain, they will probably have some inconclusive review that will stumble on for a decade before turning nothing up.
Personally i would like to see Brooks and Coulson go down, the BskyB bid blocked and damage to the Times and possibly the Sun. The worst likley scenario for Murdock as that he will be forced to close other papers, or sell up much of his UK print business. I would also like to see some damage delt to Cameron and the conservatives but im not confident that i will get what i want. The government, Murdock, and some in the police would all like this situation to quitely fizzle out. So powerful groups will be stacking the odds against those interested in a genuine investigation.