My opinion: The Dems will choose someone "electable", and just like Kerry benefited from his lack of assertiveness, personality, etc., to fill that role, someone else will come along in early 2008 to please the conclaves in Iowa.
[WS:] I do not think that Democrats have many choices today. They are not electable on their merits no matter who they run, because their traditional position - reliance on government in the provision of collective security and programs assisting the "less fortunate" - has lost much of its appeal among voters, especially those who perceive themselves (accurately or not) as upwardly mobile and professional. For this upwardly aspiring electorate - the "your potential our passion" appeal of the free market and neo-liberalism espoused by conservatives is far greater than that of government tutelage and "initiative clipping" collectivism associated with Democrats or the Left more generally.
This is not just the US phenomenon - Europe and Mexico experience the same phenomenon, as neo-liberal or conservative candidates consistently win elections. South America is a bit more complicated, because left vote is an expression of anti-Americanism, which gained popularity, but otherwise neo-liberalism seems popular among urban and professional classes. I see a similar tendency in Africa - where traditional "left" collectivism still holds appeal to rural populations, while urban classes are more attracted to liberalism. I am pretty sure you will find the same in India, albeit I would defer to more informed opinions on this subject.
The bottom line is that the traditionally left-of-the-centre positions are for the most part passé, kaput, finito among a large segments of the population that see themselves as upwardly mobile and professional. It is not that these folks are conservative - most of them are probably not - but that they look for something different than the "mass society" that formed the basis of the traditional left programs. Thus far, only right-of-the-centre parties cater to that demand, while the left has little to offer in this respect.
As long as Democrats (or any left-of-the-centre party) cannot provide an alternative to neo-liberalism that is attractive to the upwardly oriented middle class - they will keep losing elections. They only chance is "protest vote" against some unpopular policies -on which they seem to be counting. And as long as catering to the pissed off and left behind is the main Democrat strategy, their focus on "electable personalities" while tacitly deferring to neo-liberalism currently popular with the middle class is the right way to go.
Wojtek