> The domain has also been excluded from future registrations so that no other entity (local or abroad) can re-register it.
So much for PGs theory that someone there wanted the domain and they took it at a pretext: http://news.ycombinator.com/item?id=1764475 It should be easy enough to check up on it periodically to see if they're true to their word.
I wonder if the "local Libyan internet community" is an open body or if they are semi government.
On the whole this is a pretty levelheaded and clear response, and it never hurts to see the other side of the story.
That said, I still think that you're much better off to invest your time, money and effort in to .com, .net and .org domains and to steer clear of cutesy domains from countries that can disable your domain based on the content of your services.
As for their regulations being only available in Arabic: http://nic.ly/regulations.php