McCain was flailing during the Campaign. The past 8 years he had been angering the conservative base, and he continued to do so often during the Primaries. However, upon the start of the Presidential campaign he suddenly tried to start acting as "Joe Conservative", trying hard to steer back towards the right and regrab his base. It was failing massively as people saw it, correctly imho, as phony.
On the flip side, Independents and Moderate Democrats...long thought to be the "strength" of McCain...were watching it and becoming disgusted by it. The person they thought previously at the very least had integrity and stuck to his guns was suddenly pandering to the other side. On top of that he seemed to hav abandoned much of the moderate, compromising, middle of the road language he was known and liked for. Combining that with the appeal of Obama to Independents, a group that likely has the most "casual" observers of the three sides, and to Democrats and you had a situation where McCain was doing far worse than expected with Moderates.
Going into the conventions McCain was hurting in the polls. He had lagged behind Obama for some time, had little momentum, and was hurting in the intangible arena of "message" to Obama's Hope and Change and his "historic" identity.
Going into the DNC Obama had an averaged +1.4 over McCain. By conventions end it bounced to +3.9. Typically a bounce continues for a bit after the convention. However, the Palin announcement actually stuck it at +3.9 and then trended it downwards to 3.4 till the first large waves of attacks began. Between the residual bounce, the negative press due to Republican reaction to Gustav, and the beginning attacks on Palin the Republicans went into the convention with Obama +6.4 in the polls. A number that likely would've been higher if not for the Palin announcement, which gave the only opposite movement of the polls from the start of the DNC to the start of the RNC.
By the end of the RNC the Republican Bounce took it back down to +2.6 for Obama. By four days out, similar to Obama's, it had became McCain up +2.4.
A few things to take away from this. The DNC bounced Obama 2.2 points during, 4.7 total. The RNC bounced McCain 3.8 points during, and 9.3 for the total. Another interesting note, the bounce for Obama's speech was a 1 point bounce where Palin's night bounce 1.4 (though Guilliani did speak prior to her that day).
Prior to the two conventions the Republican base was not excited. Donations were low. Motivation was low. Yet amazingly by the end of the convention the base seemed far more energized, far more interested, and the general public was far more positive towards McCain. I ask you, what was it that changed between the start of convention season and the end of convention season?
In Palin McCain had someone that excited his base. A person with seemingly strong conservative credentials and seemed decent at articulating it in the little the base had heard her speak. Someone that, like Obama, they could see a potential future in for the party which gave them a reason to be excited. Look back at stories and records at that time and you'll see that the GOP documented a significant increase in donations and interest in the campaigns after her announcement. What it also gave them was someone who helped to counter act a bit of the message edge that Obama had in theory. Suddenly McCain's campaign was no longer just the same typical white guy going up against a historic candidate, but had an element of history as well. No longer was it just an old out of touch guy going up against a young and charismatic candidate, but was instilled with youth, charisma, and enthusiasm as well.
Sarah Palin was a great choice.
Then came the bungel.
The first bungel is apparently when they made the choice. The McCain campaign should've been searching for, vetting, and picking a VP candidate from the start of this whole thing. If they had vetted Palin at all they would've realized she was not ready quite yet for the national media. Which would've meant she either needed to be picked early and not announced publicly, giving her a month or so unknown to study up. OR they should've realized it would've been too much work and gone another direction. Instead, by all accounts, they chose her rather late in the process. That's on them, not on Palin.
This led to the next bungel, keeping her from the media for the first little bit. Now, it was a necessitiy because she wasn't ready. However, she wasn't ready due to bungle #1 up above. This then, correctly, led to attacks on her being "protected" or "sheltered" and just immedietely gave fuel for the media without any real way to counter it. Not smart.
Bungle #3, and the biggest bungle in my mind, was where they went from there. It shouldn't have taken a genius to know Palin wasn't going to massively appeal to the middle. That wasn't even her point. To say she was supposed to appeal to the middle is like saying that a basketball is meant to be hit with a baseball bat. Her use was motivating, exciting, and encouraging the base because they were completely disinterested in McCain. Without an energized base you stand no hope of ever winning a national election. And in that, they did act correctly...they let her go out, say the right things, and court the support and excitement of conservatives.
What they bungled at...and due to the damage already done it would've been a hard sell anyways...was what they had McCain do. Steadfast ideological candidates bring on Moderate VP's to try and win over independents to a campaign thinking that the Prez will pick people not just on ideology. On the flip side, if you pick an ideological VP then your Prez needs to be reaching to the middle. McCain was known best as a moderate guy and his phoney baloney "Joe Conservative" act was not being bought by almost anyone in the base. His best strategic act here, after Palins nomination, would have been to drop the act and run screaming back to the middle trying to woo at least some independents back to his side. As I said, difficult based on his earlier actions, but at least it would've added SOMETHING to the campaign.
Instead, McCain continued to try and be Joe Conservative, continued trying to paint him and Palin alike rather than as complimentary pieces, and continued to try and puff up his Republican credentials. Essentially, he was pandering to the same voting crowd as Palin but doing a worse job at it, which didn't really help anything.
Due to this, McCain lost more independents that were turned off by the VP pick and had no reason to stay with that side since McCain wasn't even presenting himself as a moderate. However, as I said he was already hurting in Independents from the fact they largely were swinging Obama from the start.
I think that had McCain's camp made the choice earlier, giving Palin time while unknown to study up so she could come on the scene ready day one, and then properly had McCain push his Moderate credentials while using Palin to sway the base that the election would've been far closer.
I also think that if McCain had nominated others people suggested, like Joe Lieberman, that instead of a large defeat he likely would've been handed a Mondale type loss. McCain/Lieberman, with McCain playing Joe Conservative and Lieberman being...well lieberman...is not something I think would've swayed many Independents or Democrats away from Obama while at the same time would've completely deflated the base. Instead of having a relatively strong base and weak independents, McCain would've likely instead had a weak base and a mildly weak independents.
Palin helped propel McCain into the positives with polls for the first time in quite some time. She helped generate a great deal of money, excitement, and votes from within the base. And she gave McCain the chance to be himself and try to appeal to his normal constituency.
Palin wasn't a perfect pick, but she was far from a bad pick, and likely caused the Election to actually be closer than it had been with some of the other suggested names that had floated around at the time.