1) There weren't two sides to this lawsuit, there were 18 sides: the ISB on one side, and the 17 people,organizations and media outlets that the ISB sued. This lawsuit was never just the ISB vs. TDP.
2) The ISB withdrew its lawsuit because during the discovery process, lots of information was coming out that confirmed what the defendants had been questioning all along. From Dennis Hale, one of the people sued by the ISB for defamation:
"In the months before the ISB decided to abandon its claims against us, the discovery process – often the worst part of a protracted civil litigation – was uncovering even more disturbing facts about the ISB than we had previously known: multiple out-of-state bank accounts; millions of dollars in subsidies from Saudi Arabia; a close connection to imprisoned terrorist Abdurhaman Alamoudi and Muslim Brotherhood “spiritual director” Yusef Quaradawi; donations to the Holy Land Foundation; and more. We had said that the ISB’s leaders were not the moderate Muslims they were pretending to be. The discovery process was proving that we were more right than we knew. "
The trustees of the ISB now are the more or less the same people as before, and they include Sheikh Yusuf Al-Qaradawi (still a proposed trustee, although banned from entering the U.S.) and Dr. Walid Fitaihi (whom even the Boston Globe thought should resign). In addition, the latest trustee, Dr. Jamal Badawi, is an open supporter of the Muslim Brotherhood. The day after the lawsuit was withdrawn by the ISB, the Muslim American Society (MAS) held a press conference, confirming that the MAS is running the show now. The MAS is the American branch of the Muslim Brotherhood.
The "legitimate concerns" about the ISB leadership haven't gone anywhere.
The ICPL had nothing to do with the withdrawal of the "legal jihad" lawsuit by the ISB. The ISB could see the information coming out was damaging and they weren't going to win. It can't be defamation if it's true.