Nearly four years after filing a much-ballyhooed $30 million libel suit against cybergossip Matt Drudge, former White House aide Sidney Blumenthal settled the case yesterday for something less than he once demanded.

In fact, he agreed to pay Drudge's side $2,500 for travel costs associated with the lawsuit.

The denouement in federal court in Washington amounts to a legal victory for Drudge -- even though he long ago apologized for and retracted the 1997 report that falsely suggested that Blumenthal had beaten his wife, Jacqueline, who was also a Clinton White House aide.

Drudge said yesterday that "with a Clinton-approved lawsuit, a Clinton-appointed judge and Clinton's right-hand man bringing it, I didn't know how it was going to come out. The irony that Blumenthal has to pay me to let him out of a lawsuit he brought says it all from my end."

But Blumenthal said that "suing Drudge was the right thing to do because it was the only way to make absolutely clear that his story was a malicious and reckless lie.

"Unfortunately, he is backed by unlimited funds from political supporters who use a tax-exempt foundation. He'd like to see the lawsuit go on endlessly. Bad publicity for him is good for his kind of business. Drudge has placed enough burden on our family for four years and we're moving on with our lives."

Blumenthal said the suit has cost him tens of thousands of dollars in legal fees. He said he agreed to pay $2,500 to Drudge's Los Angeles attorney, Manny Klausner, as "nuisance value" because Klausner had traveled to Washington for a deposition of writer David Brock that was canceled. Klausner is associated with the libertarian-oriented Individual Rights Foundation, which has picked up all of Drudge's costs through a legal defense fund.

What was once a high-profile lawsuit nearly expired from inactivity. After being prodded by the judge in the case to demonstrate some progress, Blumenthal's side recently issued subpoenas to two dozen people -- including this reporter, whose summons over The Washington Post's initial account of the matter was dropped -- but never took the depositions.

On April 19, Blumenthal's lawyer, William McDaniel, sent a one-line e-mail to Klausner: "Just put an end to this."

Since "both sides distrusted each other," as Drudge put it, the case was not settled until Blumenthal signed the agreement at 4 p.m. yesterday before a federal magistrate, with Drudge participating from Miami by fax and conference call.

Drudge has made great political hay out of the fact that Blumenthal consulted his White House superiors at the time -- namely, President Clinton and Vice President Gore -- before proceeding with the private suit.

The lawsuit raised potentially groundbreaking issues about electronic journalism because Blumenthal and his wife also sued America Online, which carried Drudge's column. AOL argued that it was not acting as a publisher because it simply reprinted the column rather than supervising or editing it. A judge later agreed, severing AOL from the case.

In his apology, a day after posting the unfounded rumor, Drudge told The Post that "someone was using me to try to go after" the Blumenthal story and that "this is a case of using me to broadcast dirty laundry. I think I've been had." Drudge had not called Blumenthal for comment, saying he didn't know how to reach him.

The mistake brought Drudge, then earning $35,000 a year, a major dose of national publicity, five months before he was the first to publish details of the Monica Lewinsky story.

Blumenthal dismissed as "ridiculous" Drudge's suggestion that he abandoned the suit because the other side planned to depose a new witness who had derogatory information about him. "It's a continuation of the libel," Blumenthal said. "Too bad he doesn't know what the line of decency is. I hope I've injected in some small way some element of caution in those who would imitate Drudge's methods."

Drudge acknowledged that the litigation had affected his reputation. "My name became synonymous with the lawsuit," he said. But, he said, "the First Amendment protects mistakes. Surely Sidney Blumenthal can understand that. The great thing about this medium I'm working in is that you can fix things fast."

"My name became synonymous with the lawsuit," Matt Drudge said; his legal costs were paid by a libertarian group.