Great book - Z and M lay out their positions so clearly a confessor couldn't ask for more. I shall not recap the debate but throw in some of my own thoughts, for what they're worth, in the hope that they help clarify for those who has already read the book. If you haven't read the book - do so - it is well worth the small effort.
1. Dialectic involves resolving analytic contradictions. Thesis X - and antithesis (not X) form a classic analytic contradiction that resolve themselves through the process of the dialectic to a larger perspective of the world. This activity is strictly within the Kantian Idealist framework - the movement involved is the processes of the empty cogito - and hence firmly Cartesian.
Paradox is NOT an analytic contradiction but empirical facts or events that the cogito trips over and must take account of. As such it is NOT purely analytic or Kantian Idealist. This is my understanding as to why Milbank considers Zizek's Hegelianism to be "too conservative and Cartesian".
2. The Zizekian "abyss" is the end point of the "Via Negativa" process of Theology, which predates modernism, late-stage-modernism or post-modernism (whatever you want to call it) by centuries but yet is the basic, though unrecognized, program of modernism. The Milbankian conception, for me is closely related to the "Via Positiva".
In the Via Negativa, the main activity to show what god is NOT; to separate the sacred from the profane, to prove how things and customs and traditions and people are NOT divine or sacred but in fact their opposite. It casts god out of the world, out of our souls and ultimately the universe itself. God becomes distinct from all things, beings and attributes and becomes "just a word". So the correct attitude of one engaged in Via Negativa when confronted with a painting or music or any art is the iconoclastic one - to deny the religious aspect of such things and in fact to place them in opposition to the sacred or the transcendent. Thus all things become "merely human" and trapped in the concreteness of the pragmatic, finite world - and as such - simply objects of economics for exchange.
This impenetrable wall between the secular and the sacred set up and sustained by the Via Negativa marks the world of both the atheist and the fundamentalist. For the atheist, the only thing in the sacred domain is the empty-set - a void - an inexpressible which pragmatically, therefore, does not exist. Similarly for the fundamentalist - since the sacred is inaccessible, the only way the sacred exists is in a concretized and static human artifact form - as words on paper. All three monotheisms have their "sola scriptura" - which rather than identifying god beyond words - in fact codifies and constructs god within the human Lacanian Symbolic realm. That's why atheists and fundamentalists are sometimes both referred to as "a-gnostics".
In Via Positiva, there is no separation between the secular and sacred. Here the correct attitude of being human is not commerce but worship. In recognition of our finitude, all things are viewed not as obstacles but as pointers or invitations to the transcendent. Art becomes sacramental rather than an ironic stance. The world and everything in it contains a unseen hook and an invisible line which is long enough to let us wander to the ends of the world, and still to bring us back to the transcendent with a twitch upon the thread.
3. For me, its also a simple matter of aesthetics. Zizek advocates that since god is not, but an abyss, an unfathomable void - that only the person qua abyss is truly in the image and likeness of god.
Now I'm not opposed to "the abyss" or The Real, or whatnot. In fact I'll pay good money on tickets to see a really good abyss. I'm even dutifully grateful for the freedom that the pure contingency of the abyss gives us.
Its just that Zizek's "the Abyss" can only be viewed as the final point of collapse of an exhausted late-stage modernism, having reached its final dialectical and deconstructive omega point. It can go no further - RIP.
Conversely, I delight in the green shoots and renewed life of the return of philosophy to theology, Augustinian in particular - to a univocal understanding of the lived-in world. In their rejection of the "supernatural", late-stage modernism has denied us the world as it is and only left us with the "subnatural" - a few mathematical equations here and there - and the abyss.