How and why should he repond to a false Obama-led attack?
This was a test.
John McCain passed: He didn’t take the bait.
About a thousand FReepers failed.
He should have questioned his staff and then if he was convinced it did not come from them he should have publicly denounced the stories. If his staff did say this then he still should have publicly defended Palin. He picked her and brought her to the dance- he should not have ignored this- letting it get legs.
The purpose of political attacks isn't to play some kind of game with the other political insiders, it is an attempt to plant an idea in the public's mind which will remain for a long time. That's the "why".
The "how" is simple - put out a news release deploring the attacks, and include a couple of quotes from campaign staffers and McCain himself noting that the attacks are false and unfair. No need to point out their source, let the supportive media folks take care of that.
If you don't respond to attacks - even false ones - the idea contained in the attack becomes believed by the public. The failure to respond to attacks is one reason Republicans are in the situation we are in.