According to this article in IHE (H/T Leiter), Kenneth Howell has been rehired for the Fall semester, but with no assurance that he will continue after that. Also, the bizzaro arrangement whereby the Catholic Newman Center nominates and pays for the adjunct who teaches Intro to Catholicism has been dissolved. All future Intro Catholicism instructors will be hired by the department in the usual way and paid by the University in the usual way.
I am mostly satisfied with this outcome. As I said before, I do not think the email was hate speech, and I don't think Howell should have been fired over it. I was also very suspicious of the arrangement between UIUC (or is it UICU?) and the Newman Center, and am glad to see it dissolved. And if the email is representative of Howell's teaching, this gives the department a chance to hire a competent instructor for the Spring.
However, Howell's lawyers make it sound like they're pretty convinced that Howell was a victim of anti-Catholic bigotry, and are ready to sue of his contract isn't renewed for 2011. So if they're going to fire him again, they should probably try to do so in a way that sends a clear signal that that's not what's happening. One way would be to make a clear case for some other cause. Another would be to just hire a different Catholic. But if it is bigotry (which I doubt--what are the odds that a Religious Studies department is full of anti-Catholic bigots?), they really should just keep rehiring him, and also they should fuck off.