Cowards?

The Iranian government, after supplying, bankrolling and otherwise funding Hezbollah, isn't exactly bravely entering the conflict in its own right. Instead, it offers safe haven for its leaders (and presumably other Iranians who might be in Lebanon), a steady flow of money and arms when they are required, and trained and ready suicide bombers or access to terrorist training.
Like-wise Israel, knowing full well that the real problem lies over the border in Syria and Iran, is mercilessly targeting Lebanon, even letting its own citizens think that it is hitting at the root cause of their problem. Attacks that might engage enemy states don't even seem to be on the table. Even an accidental foray or an empty threat to those countries would more effectively engage them. Fear (or cowardice) seems to make this a path they won't take.

Is it good for the democratic pincer movement?

Looking back st my Januarydemocracy in palestine post, my model would dictate that an economically destitute Lebanon would be bad for its democracy in the medium term. This would entrench the non-democratic regimes of sponsoring neighbours for a while, making a greater satan, little satan steamroller more effective than constant democratic pressure from their own citizens for regime change.