Sitting Presidents who face a strong primary challenge from inside their own party generally win the nomination and lose the general election.
Jerry Ford and Ronald Reagan. 1976
Jimmy Carter and Edward Kennedy 1980.
The best of all possible worlds is for Clinton to challenge Obama in the Dem primaries and for Clinton to lose thereby delaying the start of the Dem campaign for President and using up resources that could have been used against a Rep in the general election.
Sitting Presidents who face a strong primary challenge from inside their own party, then withdraw, generally leave the eventual nominee to lose the general election.
Harry Truman and Adlai Stevenson - 1952
Lyndon B. Johnson and Hubert Humphrey - 1968