As your aware the situation has greatly escalated since you asked this question but I will answer here as well as in the other thread pertaining to the events unfolding in Egypt.
I believe Mubarak will have little choice but to resign as more pressure is brought to bear on his disenegrating position. However he has stated that he plans on remaining in power regardless what he has to do to put down the civil uprising that is solidifying against him and his regime.
Best case scenerio, at present, in my opinion is that the Egyptian Army chooses not to back him and refuses to be his muscle against the Egyptian people. If the Army stands with Mubarak I fear that a great deal of blood will be shed which can only lead to an even more unstable situation in the region.
As far as the situation improving if/when Mubarak resigns or is removed from office...impossible to really tell at this point. There are just to many factors working to know with any certainty that the vacuum that will result is going to end quickly with a peaceful transition into a new government.
There is alot of anger as well as alot of problems that exsist within the population of Egypt that is going to take some very delicate handling to bring this tense situation to a peaceful resolution.
I pray the violence ends...but personally...right now...I am not very optimistic about the outcome of this event.

I think it wouldn't get any worse if he resigns and will absolutely get worse the longer he digs his heels in. But good and bad are subjective terms. The people in Iran who ousted the Shah in favor of a fundamentalist religious government think their lot got "better" although their economy got much worse, women's rights have disappeared, and heroin addiction is up in that part of the world