Do a search of the news reports back around July 12nd. I found it on al Jazeera...which some might consider unreliable, but they generally have better journalistic integrity than to just completely make sh-- up (which puts them one up on Dan Rather, at least).
Interesting thing about it though...I haven't seen it in any sort of context anywhere. On its own, the quote looks pretty bad (and in any context I can imagine, it's not good). But it doesn't necessarily mean collective retribution...it could simply mean "We'll set Lebanon's recovery from their civil war back to how their infrastructure was in the mid-80s", or "We'll destabilize the country back to what it was in the '80s, if the existing government can't control it." Both of which are a far cry from "We'll bomb them back to the stone age", as it's not infrequently interpreted.
It's also a stupid policy. Lebanon's very anti-Syrian (or was a month ago, who knows now?) and was heading towards a measure of stability. A stable neighbor on its northern border is good for Israel. Instead, Israel's destabilizing the country and probably pushing it closer to Syria, both of which will make it easier for Hizb'Allah and other groups to operate there. Fortunately, it's a safe bet that Lt. Gen. Halutz doesn't make that policy...unfortunately, it seems that someone who does listened to him.