If he goes too conservative, the moderates will control the course of the nomination. I don't think Bush wants that -- it'll make him look too weak.
You're right-on about the moderates. Like it or not, Bush has to factor them in. I think he'll look for someone like Roberts, a LEGAL conservative, not an ideological conservative (at least not on paper).
We have enough brilliant conservative candidates to nominate MORE than one if neccessary. Eventually the pressure will be on the dems and the stupid GO14 to vote the nominee in.