Update: I've now read Slaughter's latest entry in the debate, and at least on a theoretical level I tend to agree with the "walk and chew gum" formula: sovereignty as it's coming to be understood implies both a state's monopoly on the legitimate use of force within its borders (at least in the normal run of things) and a duty to act in non-exterminatory ways toward its citizens. As Slaughter herself appears to acknowledge, this hardly resolves all the practical problems, but as a general formula it seems unobjectionable.
I would be lying if I'd said I have read with extremely close attention the recent blog posts by A.-M. Slaughter (here), J. Foust (here), D.P. Trombly (here), and others about the implications of the Libya intervention for the notion of state sovereignty. But the gist is that Slaughter wrote a post at The Atlantic saying that R2P and its application in Libya means that the "nature of sovereignty has fundamentally changed," Foust and Trombly took exception, and they were off.
Guess what? None of them is completely right. (You knew I was going to say that.) I think Slaughter is probably exaggerating when she implies that the notion of sovereignty as it is traditionally understood by international lawyers is dead -- to the extent she has implied that -- and Foust and Trombly are wrong to suggest that the 19th and 20th-century (note: their periodization) concept of sovereignty is as much about preventing civil war as it is about preventing external intervention in a state's 'internal affairs'. The modern idea of state sovereignty as enshrined for instance in Art. 2(7) of the UN Charter has more to do with the prerogatives of governments (states) than anything else. R2P has widened and formalized a traditional exception rather than completely upended the received notion of sovereignty, or so I would be inclined to argue.
Anyway, does the whole debate matter? I'm not sure it does. It gives IR types another subject to argue about, but whether it has any real importance beyond that is questionable. Governments will continue to make decisions about intervention for a variety of reasons, but whether any policy-makers will first sit down and reach a position on whether sovereignty has 'fundamentally changed' is, I think, doubtful. But this is, admittedly, pure speculation.
Added on 9/5: See also J. Ulfelder here.