If the story's already breaking world wide, if even the NYT is actually covering it, then they can't ignore it - it would be like trying to conceal the sunrise. All they can do is play it like the impeachment story - spin, spin and spin some more, and go all-out against their accusers. Only this is about a lot more than trying to hide the fact that their pervert president was diddling the interns.
I agree that they will have some, probably a lot, of success in downplaying this. However, they'll be forced to be on the defensive for quite a while, and it couldn't have happened at a worse time for them, on the eve of their convention. Kerry can only go so far trying to campaign as the Invisible Man, and it ain't far enough to get him into the White House. Now he's going to be forced to hide even more than he already is.
I hope you're right.