Wayne, I think the Reps will face some tough choices in 2008 as well.
The bedrock of the current Rep voter base is conservative Christians and other "moral values" voters. Obviously enough other people supported Bush too, but that bedrock group is what pulled this election out for him.
McCain is not so strong with that bedrock core; he's an independent's darling, and Bush wiped him up in the 2000 primaries. Remember the anonymous phone calls claiming that McCain fathered black children out of wedlock, that destroyed him in the S. Carolina primary (
http://www.boston.com/news/politics/president/articles/2004/03/21/the_anatomy_of_a_smear_campaign/ ).
Guiliani has a long history of supporting abortion, of which conservative Christians are very aware (
http://www.christiangallery.com/silenceofshepherds.htm ).
Arnold cannot run for President, by law (not born in the US). And he is pretty liberal.
I do agree the Dems face tougher choices. They have to reject Hilary Clinton's likely bid without alienating her supporters. They have to have a heart to heart with their most controversial elements - gay rights activists. They still have to improve their grassroots campaigning in smaller towns and suburbs, to catch up with the Rep organization. And they have to choose a strong candidate! The conventional wisdom seems to be that they need a Southern Democrat - I don't think that's right, a plain-spoken Midwesterner would work, although obviously if Clinton II comes along, that's great. The main thing is, he has to connect with people, like Clinton and Bush do.