jna,
Let's start with the equation for the radial distance as a function of semi-major axis a, eccentricity e, and true anomaly \theta for a Keplerian orbit:
r = \frac{a(1-e^2)}{1-e\cos\theta}
Perigee occurs when \theta = \pi:
r_p = a(1-e)
Differentiating with respect to time,
\dot r_p = \dot a(1-e) - a\dot e
So the condition for an increasing perigee distance is
\dot e < (1-e)\frac{\dot a}{a}
Note that from Jan 2006 to Jan 2010 the satellite's semi-major axis decreased by only 10 or so kilometers per year (this was thanks to the prolonged solar minimum between solar cycles 23 and 24). Since the semi major axis is about 6800 km, this slow decline in the semi major makes \dot a/a rather small. The condition for an increasing perigee distance in this time frame reduces to \dot e < -0.0147/\text{year}. A quick glance at the eccentricity plot attached with post #8 shows that the eccentricity declined much faster than this.Without derivation, the instantaneous change in eccentricity due to drag is given by
\frac{de}{dt} = -\,\frac{A C_D}{m} \rho v (1-e^2)\frac{\cos E}{1-e\cos E}
where e is the eccentricity, A is the satellite cross section area, CD is the coefficient of drag, m is the satellite's mass, [and E is the eccentric anomaly. Averaging this instantaneous value over an orbit or longer yields a more meaningful value.
What we want is this average rate of change in the eccentricity to be negative (strongly negative). This will happen if the values of the expression when cos(E) is positive dominate over the values when cos(E) is negative. This will typically be the case because density tends to decrease exponentially with altitude. Ignoring the diurnal bulge, this is not a strong enough effect to overcome the \dot a / a term. Thanks to the diurnal bulge, if perigee more or less coincides with the bulge the increased density due to the bulge will make \dot e strongly negative. The bulge can also make \dot e positive if perigee and passage through the bulge are 180 degrees out of sync.
The heavy duty stuff is Lagrange's Planetary Equations. For example, see http://ccar.colorado.edu/asen5050/ASEN5050/Lectures_files/lecture15.pdf and http://ccar.colorado.edu/asen5050/ASEN5050/Lectures_files/lecture16.pdf. These lecture notes give a brief overview of the concept of variation of parameters with respect to orbits. Atmospheric drag is a nonconservative force, so you have to use Gauss' form of the Lagrange Planetary Equations. This paper, http://articles.adsabs.harvard.edu/cgi-bin/nph-iarticle_query?1976CeMec..14..335J&data_type=PDF_HIGH&whole_paper=YES&type=PRINTER&filetype=.pdf gives a simple treatment of atmospheric drag; it does not address the diurnal bulge.