> If the situation could get any grimmer for the democrats, it's
> not immediately clear how.

A third party.

In a two-party system, what you describe isn't too relevant. It just requires people to get annoyed enough with the Republicans. They can, and I believe will, do that in the next four years. While in a two-party system the Democrats can never die.

It will begin with the draft. For the democrats, there is an advantage in this. If Kerry would have won and then it was introduced, it would have made him very unpopular. Right now the Democrats can use it to hit Bush over the head with.