"Rudy dropped out of the senate race because he had cancer. I'm sure there are better reasons for dropping out (and continuing to be mayor of the world's most important city), but I can't think of too many right now."
Granted, but he's not running against her now. He has unfinished business, doesn't he?
If Rudy wants to run for the presidency, he would be foolish to run for the senate in '06. It would be bloody, expensive, and if he lost, it would sour his '08 presidential bid.
The main reason he doesn't have to take on Hillary now for the senate (your "unfinished business") is that, 9/11 was one of the most transformation events in our history, and Rudy was right there being transformed along with it. Put another way: he's above a knock-down, drag-out battle with Hillary for the senate now.