1. Remember after the '02 elections, the immediate Dem party line was that the true liberal message wasn't getting out, and that's why they were losing? Boom. Shift further to the left, giving rise to Dean and a host of others trying to out-liberal each other.
2. Position Hillary as the more "moderate", voice of reason, reining in the hard-core, extreme liberals.
3. Crushing defeat for Dems in '04.
4. Position Hillary as the party healer, and centrist, representing the right combination of experience and "mainstream" thinking to win the White House in '08.
In my opinion, this is classic Clinton triangulation, with the current plan to use this year's election to properly position Hillary in '08.