Aaron Belkin at HuffPo reports that there's a "middle ground" to Don't Ask, Don't Tell thanks to af forthcoming military law study. Obama can use his position as commander-in-chief to issue an executive order to stop enforcement of Don't Ask, Don't Tell. Stopping enforcement is the same as repealing it, so there really isn't a "middle ground" so much as getting around the annoying process of actually passing a law.
This all comes about because the military fired yet another Arabic-speaking linguist because he came out as gay. The reasons for continuing the Don't Ask, Don't Tell policy become increasingly nonsensical. It is both wildly unpopular with the general public and actually serves as a detriment to the military's ability to attract the best and most qualified people.
Although legislation has been introduced to repeal the policy, not much has happened with it. Don't Ask, Don't Tell started as an executive order that was later codified into law. Perhaps the repeal will start the same way.