I thought it was a smart move as she could have been more of a threat to him in the Senate and by appointing her he pretty much controls her.
He also gave out many of the S.O.S. responsibilities to others, thus taking more power away from her. Just my thoughts.
I dunno. In the Senate, she'd be just one in a group of one hundred, but as SoS, she's in a solo position of great (perceived) authority, and very high profile.
I think she can do much more damage to Obama from her current position than from the Senate, by differing with him on foreign policy, and her relations with foreign heads of state.