The question worth asking here is what can be done. Unfortunately, civil society seems to have reached its limit. It is already obvious that the society that 'Team Anna' represents has very little respect for parliamentary democracy. Most of his supporters don't just denounce corruption, they denounce democracy itself. Presumably, they believe that the country should be handed over to wise old men, albeit with an air of sophistication around them.
The truth us that without democracy, the Indian Union would have disintegrated long back. It is not unity in diversity nor is it a rigid caste system that has kept us together: democracy is the only reason we remain a united country. And 'Team Anna' had better realize this: if democracy is substituted for anything else, we can kiss our Union goodbye.
Now, it is apparent that the civil movement that Anna Hazare spearheaded has not been able to meet its goals. In a democracy, when a civil initiative fails, it must convert itself into a political movement. Hazare's camp would tell you that they are not into politics. But then, they hold India's entire electorate in deep contempt: they denounce the electorate as being for sale. In other words, they believe that they are above the nation and its Constitution. And this is not acceptable.
If 'Team Anna' is not able to blackmail the Government, then it must take its cause to the people: it must convert itself into a political movement and try to take control by the ballot. If Anna's men (and women) really believe that the people will not vote for them, then they accept that corruption is so deep-rooted that no matter how strong the Lokpal is, it is doomed to fail because the entire nation will, bit by bit, conspire to render it useless. That is the truth: top-down changes do not work, change must come first from the masses and then to the top.
As for the Manmohan Singh Government, it is held in such deep contempt by all sections of society that it has to be extremely cautious. If Anna Hazare does indeed proceed with his fast, then the last thing the Government should do is a midnight swoop. While it would be best is such a situation were not allowed to come altogether, if it does, the Government will have to negotiate on the backfoot. And if there is indeed a section of the Congress that favours imposition of an emergency, it should forget it. Another emergency will wipe the Congress from the face of Indian democracy.