You are quite right that in terms of money the settlement/liability/immunity issue is the biggest thing in this whole shootin match. The industry's liability is potentially infinite. But that's why a settlement could be read as a pro-industry outcome, since it entails state-supported foreclosure of liability. In my reading of one of the settlement drafts (not too comprehensively, I admit), the industry's financial obligations did not seem great.
Another wrinkle is that as things stand, Federal recoupment of settlement money is probably not the most progressive outcome. Federal control means that such funds would be used to reduce Federal debt. The fuss over funding new programs is a smokescreen, if you'll pardon the pun. By contrast, states are more likely to use some of the money to cut a few more salami slices of medicaid eligibility (e.g., expand eligibility), as well as for tax cuts.
Finally, if anybody thinks the industry's settlement costs or liability would be reflected in cigarette prices, this is a pretty bad outcome in terms of distribution. While there could be some mild deterrent effect, most smokers will go right on smoking. We'll in effect be penalizing people, and the less their income, the higher their penalty (percentage-wise).
As is the case with the Feds, the states are running surpluses now and are flush. The problem isn't where to get new money, but how to motivate public support for new spending.
Mbs