For me, Russia is a really interesting case. The West is about as much at fault for things that are happening in Ukraine as Russia. Russia merely took advantage of what NATO allowed it to do. It can't afford a world war any more than NATO can (indeed, even less so. They have no chance of winning an open war), but it's more as willing to get near such a situation. Putin will go as far as he can, and no further. He's a rather Machiavellian politician, with good grasp of NATO's way of thinking (considering he's playing them like a fiddle right now...).
Indeed, I think that the best way to understand the current situation is to be from the region which has major influences of both first and second world - only this would allow one to fully grasp how it looks from both sides. Living in Poland has this advantage. The disadvantage (aside from it being Poland

) is that when the worlds come to blows, you're stuck in the crossfire. It is rather unsettling to see conflict unfold so closely to the border, and I'm convinced it will spill over one day unless something game-changing happens.
I do admire the decisiveness of the Russian government. It doesn't fool around in though places like Middle East, and seems less hypocritical than The West (not that it's saying much). It's the same trait that causes them to exploit the Western weakness as successfully as they do. It is a strong, resilient country, but it's also way past its prime. With a strong leader, it could yet return to power (indeed, if it wasn't for Putin's blunder with gas politics, it'd be in a rather good position). I believe it could be brought back into importance, but it'd take a very talented leader (more than Putin) to do so.
That said, their economic problems might just as well be a death blow. For many people, they are, quite literally. Since Soviet Union went bankrupt and collapsed, population growth plunged (to the point of stopping to be a growth) and suicide rates skyrocketed. Russia hasn't got up since then, and it'll have a hard time doing so now, since Putin overused gas export as a political pressure tool, which resulted in other countries looking for alternatives. Russia doesn't exactly have other export options, and subjugating Ukraine isn't going to fix this. It will not be defeated by NATO (the current sanctions are misguided, mostly impacting Poland and other people who sell things
to Russia), but I think it runs the risk of having economic issues pick it apart. I think Putin's age might be showing here, but being stuck with mid-20th century, pre-globalization way of thinking is, somewhat ironically, a global problem.
Another problem is stability. Putin acts like an emperor (indeed, it likely wouldn't change much if he declared himself Czar. It'd surely be a honest move...), but he needs to remember that like all emperors, he needs a heir that would be worth his/her salt. Medviediev likely isn't, he's just a puppet. Putin is strong, clever and very charismatic, but he's old and not getting any younger. Some people from Ukraine that I know even suspected a civil war would break out should Putin die anytime soon. Needless to say, that wouldn't be good. I wouldn't hope for a Western-style democracy, at any rate. It never really worked in Russia, and due to how things work around there, I suspect it never will. It can get a good Czar, but those are difficult times and things will go bad if it doesn't (instead ending up with an useless drunk or a maniacal despot like Stalin, for instance).
Individual "normal" Russians are basically OK, but I think Russia has a major problem with both not having enough intelligent people (since they were persecuted by the communists) and having unintelligent people in high positions (the oft-ridiculed "New Russians"). Kind of like in Poland, only worse. While communists in Poland were a bit less through in disposing of aristocracy, officers and intelligence in general, in Russia, the revolution and then Stalin's purges killed or drove off nearly all of them. This first bit them in WWII and continues to do so to this day. Coupled with negative population growth (meaning they're not getting that many new intellectuals, either), this is likely a major part of the reason why Russia is in such dire straits economically.