So where do we think this all leads?

AG fires some lawyers for shaky reasoning (combination of incompetence and disloyalty perhaps

--- I have fired people for such, but then again I'm not the Attorney General

). AG steps down and new person is appointed. What is accomplished? Who "wins"? Do you (average American) feel sleep better at night and/or feel that the DoJ is more just?
Let's go through this piece by piece.
First, there is no "incompetence" in the equation. That's where the AG really messed up - suggesting that the attorneys were fired for performance reasons. The attorneys got upset (as you might image) and the AG has had to apologize for that smear.
Second, had the attorney's been fired for not loving Bush enough, and the AG had just said that, there would be no problem. However, they can't be fired for "any reason". If they were fired because they were prosecuting guilty Republicans, and the AG wanted to protect Republicans, that would be a problem.
If Gonzales steps down, what would be accomplished? Well, for starters, we would have an AG that doesn't feel it OK to lie under oath to Congress. Personally, I think that's a very good thing. Second, we would send a message to all future high office holders they can't just make <stuff> up and lie to people. Again, a good thing.
How do we know that AG lied? Well, here a just a couple choice quotes
And so let me publicly sort of preempt perhaps a question youre going to ask me, and that is: I am fully committed, as the administrations fully committed, to ensure that, with respect to every United States attorney position in this country, we will have a presidentially appointed, Senate-confirmed United States attorney.
(we know have emails from the Justice Department directly contradicting this as they plot to avoid Senate Confirmation).
OR
I would never, ever make a change in a United States Attorney position for political reasons, or if it would in any way jeopardize an ongoing serious investigation, Attorney General Alberto Gonzales told the Senate Judiciary Committee on January 18th. I just would not do it.
(keep this quote in mind as people claim there's no problem firing people for not being "loyal Bushies". It might not be illegal, but lying about it sure is.