Obama's proven himself to be a lightweight. No way he gets anything more than Hillary's Veep slot and probably not even that.
For the Dems, it's Hillary, end of story. For the Repubs, still wide open.
As far as "who wins?", I really don't know. I was sure last election that the Repubs could pull it out and I was dead wrong - they were punished for not living up to their promises and conservative goals even though the result was ... less conservatism overall. Will the idea of President Hillary send enough conservatives to the polls to vote for more Republicans in 2008? Hard for me to say. I certainly hope so, but the electorate is a funny thing - people pretty much end up doing what they want, TV ads, long campaigns, and afteraffects aside.
Not a bad system.
-dale