I don't agree.
The choice will be Rudy vs Hilly. Hilly won't be able to convincingly waltz to the right on abortion or gun control.
Rudy, on the other hand, has that flexibility. I suspect that Rudy will attract a posture on both those issues that will resonate positively with a wide base of people, while Hilly will be much more contrained on those issues.
It won't be Rudy vs Bill. And it won't be Rudy vs Edwards, either, since Edwards will be out of the spotlight for four long years. So much for the VP candidate having some advantage in the next primary -'Joementum' Lieberman found that out. It will be Rudy vs Hilly, make no mistake about it. Rudy has kept a good profile since he left office in 2002, and my guess is that he will gain an even greater posture by joining the Bush admin in some capacity during the 2nd term (as VP or in Homeland Security, for example).
As far as the War on Terror goes, it is just beginning. In fact, I fully expect more stateside attacks on the USA in 2004-2008. I think the grave situation we are in will be made more clear by 2008, and not become more ambiguous. I am not as optimistic as you are on the matter.
I covered 3rd party candidates in another post, since there won't be a credible one it isn't that much of a big deal. If in a Rudy vs Hilly matchup (and forget the other matchups since they aren't likely at all), if Rudy can't beat her, even given a challenge on the right from him by a minor candidate (which, everyone seems to forget, would largely be offset by a farther-left challenge a la Nader on the dem side), then we frankly don't deserve to win.
Rudy is one tough SOB and well suited to lead the next phase on the War on Islamic Fundamentalism. If any conservatives are so petty as to not see that, and it costs him the election, they (and all of us) will get what they deserve.
HINT: It isn't pretty.
What makes you think the national security situation will get worse? If anything, it ought to get better after all Bush has done to teach the world what happens when you f*** with the United States.