2008 elections seem to be the only reason Democrats didn't resort to mass suicide after Bush won in 04. I've been thinking about them as well, and I'm not so sure the Dems should get their hopes us yet.
Hillary is the front runner for the Democrats. Some think she is a strong candidate, some a weak. I'm not sure. She doesn't appeal to me, but then again, I don't represent every voter. What I do know is she is smart, and that scares me. She's already started positioning herself more towards the middle (e.g. her speech about making room for/tollerating pro-lifers). New York is a liberal state, and so is Hillary. Because of this, one may be tempted to think "here's one more northeastern liberal, bound to lose." But there are reasons to be concerned. One is how well she did when she ran for senator, winning some counties that traditionally vote Republican. Then again, New York is home to Republicans like George Pataki, Michael Bloomberg, and Rudy Guliani. I like Pataki and Giuliani, but there far from being conservative's conservatives. My guess is those Republicans who voted for Hillary, are the kind who also voted for Bloomberg: Not exactly your typical heartland conservative republican.
Democrats, in my opinion, would do better with someone like Evan Bayh, or Barack Obama. Obama is too green to run in 08. Bayh it seems is too moderate to get the nomination: That's why he's already started positioning himself more to the left. I don't think it will work though. It looks like Dems are more or less set on Hillary.
Hillary may have a shot though. She could convince some women, who would otherwise vote Republican, that it's time to have a woman president. On the other hand, if in 2008 were still talking about terrorism and national security, It difficult for me to believe we'll pick a woman to be our Commander and Chief and keep us safe. My prediction is Hillary will take the nomination but lose for this precise reason.
The Republican side is harder. I really like Dick Cheney, but he has said, unequivocally, he will not run in 2008. That leaves Sens. John McCain, R-Ariz., Chuck Hagel, R-Neb., Bill Frist, R-Tenn.; New York Gov. George Pataki; Florida Gov. Jeb Bush; Massachusetts Gov. Mitt Romney; and former New York Mayor Rudy Giuliani. McCain, Pataki and Giuliani could win, but are really to liberal for my taste, and probably too liberal to get the nomination. Frist is a charismatic dud. Does anyone know anything about Hagel? Jeb Bush as far as I can tell is doing a good job if Florida. He's a lot like his brother, but seems to be a much better communicator, and that would help a ton. ( I still think that's Bush 43's biggest problem).
All and All, I think Mitt Romney is our best bet. He's a handsome Mormon Harvard Law School graduate with a wife and kids (original wife, original kids). He's pretty conservative, yet has managed to get elected governor of MASSACHUSETTS!! (only the most liberal state in the US!). This is partially due to his great communication skills. He's pro-life, though he promised not to do anything to change the laws in Massachusetts in order to get elected (he both compromised, yet didn't compromise). I especially like his positions on stem cell research and same-sex marriage. Romney is for using the embryos from fertilization clinics for research, but not for cloning human embryos (he's more liberal on this point, probably because his wife has MS). He also is against same-sex marriage and civil unions (in my opinion civil union is just a euphemism for same-sex marriage) but he favors some benefits for same-sex couples, such as hospital visitation rights (That seems very reasonable to me, especially since a hospital patient should, in my opinion, be able to have those people who are close to them come visit if they so desire). He also has executive experience. We Americans seem to prefer governors to say senators, partially for this reason. Lastly, he is talented politically. He smoothed the Salt Lake City Olympic scandal over, and did I mention, he was elected Governor of Massachusetts?!