I expect they will let him have the nomination. But they need to get his support low enough so that he will succomb to pressure to step aside at the last moment "for the sake of the party".
Hillary can't stand a protracted campaign. Too much time to drag up her's and Bill's record and she's toast. I don't think there will be fowl play. They will just keep offering up dirt until it's clear he can't win. Then they will get Kerry to really sling the dirt and try to damage Bush even though they know it will damage Kerry as well. Then Kerry will step aside and Hillary will come in as the end as the reluctant candidate doing the party a favor.