The latest talks offering dialogue were held by African Union representatives a few days ago. They first visited Ghadaffi in Tripoli and then the rebel council in Benghazi. Ghadaffi agreed to a cease fire in principal but said nothing about his leaving, and he continues to shell towns including Misrata and Brega.
The involvement of the AU will lead nowhere, it can't. The rebels won't even talk until Ghadaffi and his family step down but there is no chance this will happen. Firstly Ghadaffi has nowhere to go - he has isolated himself from every country - only uganda and zimbabwe will have him (maybe Venezuela), and while usually Saudi arabia usually takes the tin pot dictators who side with arabs (case in point ben ali and idi amin) Ghadaffi managed to personally insult the King during his first speech to the UN.
Secondly, many countries in the AU have received huge sums of money from Ghadaffi and will be reluctant to see a neighbouring leader overthrown by western force - they would rather just see a cease fire. Thirdly he's a megolamaniac who believes fully in his right to rule.
Ghadaffi will also have watched the cases of Charles Taylor in Liberia, and Karadic in Yugoslavia who were both promised immunity but ended up at the ICC in the Hague. Most recently he will have seen Mubarak being arrested and will now be certain that he will be caught and brought to trial at some point irrespective of where he goes.
He may also now feel that he actually has a chance to win, or at least to hold a stalemate. The reluctance of NATO to help the rebels on the offensive (the UN charter only permits them to protect civilians, rather than help in regime change) will have boosted this.
It also seems that many countries are now wary of what might happen to Libya post Ghadaffi, hence the inaction. The council have written up a 2 page constitution, but it focuses on removing ghadaffi and talks only in very vague ways about democracy and elections. It is more rhetoric than anything else and offers no viable solution for a new state.
The IMF says he has $6 billion in gold reserves and his recently defected interior minister suggests he may have as much as $10 billion in cash. So he can continue to pay his mercenaries and buy loyalty for some time to come.
The only thing that will change this situation is if the rebels are armed or if NATO commits more forces. If NATO and the west are reluctant to do this then it is likely that eventually Quatar will. They are trying to position themselves as a regional political powerhouse - (they've hosted a number of summits recently including the most recent libyan one. They have huge infulence in the region and are the most wealthy country here)
Giving the rebels arms however will take time (both to get here and to train people), so yet again it looks like this will drag on for a very long time.