My first reaction to the nomination of Sarah Palin was incredulity.  On the face of it, she seems like the worst possible choice for all of the reasons already spelled out extensively elsewhere.  However, this could actually be an incredibly brilliant pick for McCain.  
Obviously, one of McCain's biggest weaknesses is his inability to draw on the same Evangelical base that Bush used to eek out his two 'victories'.  These conservative Christian voters were incredibly energized by Bush and his pandering to the only issues they seem to care about; social issues like gay marriage and abortion.  They channeled their energy into record turnout in multiple key states, and were absolutely key to his election; without them he would have been easily defeated by Kerry and/or Gore.  
Palin is an evangelical dream candidate for President, ultra-christian, ultra-conservative, and a vigorous anti-abortion activist.  And Palin as VP offers two very realistic paths to the presidency: she can run after McCain leaves office, or McCain could quite possibly die in office.  McCain has already toyed with the idea of pledging to serve only one term, so don't be surprised if very soon we see him come out and publicly state that after 4 years he'll step aside, clearing the path for a then-48-year-old female Christian Evangelical candidate that the ultra-right will go nuts for.  
As soon as the christian right realizes that should McCain/Palin win, their best-case scenario has her in office inside of a year, and their worst leaves her as a viable candidate in 4, they'll get over their dislike of McCain very quickly.  And that would make the race much more similar to Bush V. Kerry than I for one would be comfortable with.