Your premise assumes the Democrats are completely logical and completely rational and it completely ignores how they nominate their candidates. The Iowa caucuses and the New Hampshire primary have influence far beyond the numbers of voters in those states. The result will likely be that Hillary will position herself to do well (top 3 in Iowa) and win in New Hampshire. That will make her the whorse to beat.
Whether or not a Senator from New York can win the presidency is another matter. I maintain a Senator from New York can become president, even a liberal one, as long as she is not viewed as being as liberal as Kerry or Dukakis. She will likely win the northeast (from DC-Maryland on to Maine), Illinois, Minnesota, Michigan, Hawaii, and the three left coast states. That will give her 211 electoral votes. She will do well in Florida, Ohio, Pennsylvania, and Missouri. So don't think she cannot win.
The Dems are so in love with Hill and BIll that they would nominate the two of them in a landslide... they don't care if they are libs... to their crowd they walk on water.