Discussion of the proper use of the OT came up many times in the adult Sunday School I used to teach. There is quite a lot of hogwash being taught out there. I even briefly had in class a Marcionite that rejected the canonicity of the OT. He was always good for a lively discussion.
What I taught is that all of the OT is literally true but not all of it is literally binding on Christians. It is to be spiritually understood and inwardly applied. For example, the bloody cleansing of Canaan by Joshua (always a hangup for younger believers) can be understood as a commandment to mercilessly exterminate all strongholds of sin within the believers own life, no matter how innocent or even profitable these sins may seem. Likewise, the Levitical laws established the Hebrews as a "peculiar people" unlike any other; so, too should the believer stive to separate themselves from the world, not by avoiding certain foods or wearing certain things, but by avoiding the snares of sin and putting on Godly habits.
When you look at the spiritual truths in Leviticus, it is really rather awesome - even more so when you look at the sacrifices and how they really point to Christ.
In Judah's case (Judges 1), God commanded Judah to go and take possession of the land. Judah asked Simeon to go up and help him. They meant with some success but was unable to dislodge the people because of their "chariots of iron". In Benjamin's case, they didn't bother to do anything. Instead they allowed the Jebusites to remain and live with them, as did the tribe of Joseph. As for the Canaanites, the Israelites determine that it would be much more profitable for making slaves out of them than following God's command (Judges 1:28-34). Dan was so weak in their faith that they never took control and lived in fear of the Amorites by hiding in the hills (Judges 1:35). Only blessed Caleb was anxious to go in there and try to get the job done (at 85!!!).
In each of these cases, the Israelites offered excuses and presented probably what sounded like very good reasons for not doing what God had commanded them to do-drive out the inhabitants and make no agreements with them. Perhaps they were trying to be kind. Perhaps they rationalized to themselves that these people would convert to their faith. More likely they saw it as an opportunity of enslaving a people for their own gain. Whatever the reason, in Judges 2:1-4 we find God was pretty displeased over the whole mess and told the Israelites that their compromises would end up being a snare around their necks. (Doesn't this sound like what the church is going through today?)
I'm not suggesting we start hacking up heathens with swords (although a few heretics might be OK). :O) But I would suggest that we take a very close look at what happened. God gave the commandment to Joshua to cleanse Canaan because it was in their best spiritual and national interest. The compromising of the Israelites really undermined what was BEST for themselves.
Yes, we can spiritualize this but I also think there is a literal application here. Like God did for Joshua and the Israelites, God has given us commandments that are the very BEST for us. Every time we compromise a command, either doing something we shouldn't or not doing something that we should, just like the Israelites we are compromising what God has determined to be the very best for our lives. And, unfortunately, for each of us this happens very frequently.
And, btw, is it any wonder that God is wrathful? He keeps wanting and giving us the very best but we don't want it. We keep rejecting or fail to do it. Indeed God is long suffering.
I'm convinced that God wanted this recorded for our instruction-not to hack up the Canaanites but to be obedient to His instructions so it will go well for us. We can see the results through Israel of what happens when we are disobedient. This sad episode in Israel's life underscores what happens to us as believers every time we transgress God's commands. It isn't just sin against God, but its that we make our lives more difficult than it should be. And just like the Israelites, we cry when things get tough because of our disobediance.
As far as Leviticus, from the wringing of the necks of turtledoves, forbidding the climbing of stairs without undergarments, to the mold in homes; they all represents various aspects of God's providential care. But that's another (BORING!!!) post. :O)