The conflict is now in its second day, and it looks as though Russia is clearly winning. Georgia withdrew from the capital of South Ossetia and called for a cease-fire, which is a little like crying uncle in this situation. That said, it's important to remember that the fact that Russia appears to be bombing civilian targets in Georgia proper doesn't necessarily effect the military situation on the ground there.
Obvious comparisons for this conflict are the Balkan wars and the recent Israel-Hezbollah conflict. In the Balkan wars, our strategy of less-than-discriminite bombing and support for the rebellious militias effectively destabilized the regime (or at least it did eventually). Russia appears to be hoping for something similar here. It basically wants to make an example or Georgia so that the other nations on its borders think twice before risking any sort of conflict. Russia's attitude and propaganda often take the theme of "payback for Kosovo", and there are clear parallels between the two situations.
I mention Israel because their basic plan for conflict seems to be pushing forward with ground troops while bombing civilian structures (not necessarily people, but power plants, etc.) in order to try to force the situation. This tactic doesn't always work for Israel because the forces they are fighting are not directly accountable to civilian populations. But it might work for Russia, which is more subtle about it and also is facing a democratic country. That said, this approach is being criticized by the international community, because it goes far beyond the bounds of just protecting South Ossetia.
Georgia probably was not expecting this harsh a response, and seems to have been hoping to roll through the region before Russia could react. Because they were hoping for that sort of result, their approach was not geared towards limiting civilian casualties, but instead it looks likely that they decided to just bomb anywhere Russian/Ossetian forces could be. I am not claiming that casualties are a high as is being reported, or that Georgia is wholly responsible, merely that they probably went for speed rather than precision, and thus caused a lot of damage in order to weaken the Russian defenses. Again sort of like Israel-Hezbollah, which was last summer's largest conflict.
Regarding military predictions, I don't know of anyone who can really say much more than "Russia is winning". A brief look at Georgia's military equipment shows that they're mostly using old soviet stuff, while Russia is using some newer equipment. This obviously puts Georgia at a slight disadvantage, but I hear the soviet stuff is dependable, and it's unclear how much of a difference the technological discrepancy makes. The Russian air force certainly has an upper hand, and that seems to be making the difference. But I don't think Georgia is about to roll over, and they could conceivably fight back if a ceasefire does not happen soon.
One last comment, mostly unrelated, is it might be hard for the Democratic peace theorists to explain this one away. Obviously, this is not a particularly immediate question, though.