My personal opinion is that without Iraq, Bush's approval rating would be well over 50% and he'd probably be ahead by 10 points.
If Iraq stabalizes, even a little, and it may be doing that right now (lower casualties, Fallujah quiet, al-Sadr in a box) then Bush should have no problem in November.
If he would tackle most of those issues -- and there is no reason why that can't be done -- he will win easily.