The foray into Lebanon where they sent in troops but withdrew much of the accompanying armour after early losses highlighted its vulnerability in an urban setting (which "officially" was clear of any civilians so they cannot have been a factor in the descision) .
You forgot the qualifier of econ21's post, here it is again, with the qualifier bolded:

I agree, Iraq War II has shown that modern heavy armour is very useful in cities, at least against a 3rd rate army (like Somali militia).
Hezbollah is not a third rate army - it is a highly trained, well equipped guerilla force, for all intents and purposes a light infantry division.