The Dems only hope is to focus on Spending, Taxes, and the War in Iraq. That way they can keep the people happy and show them "hey look, we won't F&*$-up too badly if you vote for us in '08!"
The key failings of the Democratic Party on the national stage in the past 6 years has been their lack of leadership. When they start spewing their wack-o leftist ideas they lose elections (Gore); and when they try and keep them hidden and just play the field they lose elections (Kerry). Lets face it, Bush never was that strong of a candidate, but he still managed to sneak past Gore. In 2004 Bush practically handed the Dems a winning campaign, but they put up Kerry (who was mediocre at best) and he still couldn't beat Bush. It has taken 6 years of the Republican Party making a mess of things for the American people to trust the Dems back in office after 1994.
This isn't "Thank God The Dems Are Back In Power", it's "We'll Give You Another Chance, But We're Watching You."