"Russia is not self-confident but insecure. It is reliant on exports of natural resources, not its own ability to match American technological accomplishments. It is a waning power."

This seems to be somewhat true, but the bulk of Europe is growing much more dependant on oil from Russia and is more likely to make concessions to Russia to keep the taps open. Putin seems to be drumming up the countries paranoia and nationalism to try to recover its self confidence and in a world where Americas influence is being questioned he's trying to get his country some prestige as an alternative.

If the stories of incursions into Georgian airspace are to be believed, it's possible these are meant as either intimidation and/or to gauge world reaction (none I know of).

I think the planting of a Russian flag on the ocean floor at the north pole is a similar attempt to shore up Russias confidence and another way of testing the worlds reaction (quite a bit more reaction).

Bottom line I think most of it is for domestic consumption, as a way to focus eyeballs outward and to foster nationalism.