We should never under estimate the role of popularity in an election. Guiliani has been a popular figure since 2001 (and before that) and I have not seen a decline in his popularity recently.
I was around (hate to admit it) for the "I LIKE IKE' juggernaut, I see some parallels here, different time and place, different cast of characters, but the possibilities abound. Rudy is a very POSITIVE person, people don't like gloom and doomers.
And that's my problem with the Rush Limbaugh attitude that conservatism per se is a winner. I believe strongly it's the best way politically, but that does not mean you can win every election with it.
As one example, the two most popular Senators of all are the Maine Gals. Frankly, we're lucky to have them. BOTH voted for Janice Rogers Brown! BOTH voted for Alito and Roberts. No, they aren't conservative -- but the idea we could get a southern-type conservative elected in Maine is delusional.
I don't believe we will win in 2008 with a nominee like GWB or someone further right. The only way that would work is if we had a very popular conservative available. We don't. That's why all of the favorites are not conservatives, and NONE are from the South. (Gingrich isn't in yet, so that may change).
What we are REALLY seeing is a cyclical reduction in the influence of the South. Since Kennedy, the South has had a disproportionate number of Presidential candidates and Presidents. Conventional wisdom was that no Democrat could win without the South and that Northeastern or Midwest liberals could not win. But now the two top 'rat candidates are from IL and NY. Rudy is from NY. Kerry is from MA and is as liberal as they come, yet had he won OH he'd be President without ANY of the South!!
If a 'rat wins without the South, then there will be an even bigger shift within the Republican Party than what we are seeing now. The entire Midwest and Northeast cannot be surrendered just to placate the South. A regional party means no national power or influence. A national party that is successful must be more broadly-based than strict conservatism. And that means, sometimes, that the Republican nomination will go to someone who is not conservative. Welcome to reality.