According to the NYT, she withdrew due to Senator Kennedy's deteriorating condition. An unnamed source, for whatever it's worth, says she was offered the position - but unnamed sources should always be taken with a grain of salt. Honestly, doesn't matter much anymore. She's out. Hopefully Senator Kennedy is okay.
Update: Caroline Kennedy's camp: Just Kidding. Wowzers this looks bad.
Second Update: She's kidding again! Hahaha!! Looks like she really did pull herself out, without telling the entire Kennedy clan, then some Kennedy or other told Gregory of NBC that the report wasn't true and, of course, Gregory believed it without any confirmation. Because, well, he's a horrible journalist. What we've learned tonight: As much as I like CK, she's clearly not ready for prime time.