Here's my theory - McCain's biggest worries going into the convention:
- Obama's star power - how he attracts the crowds and passionate participation that he does <-- lesser import
- How Obama's getting democrats to register in droves, and how he rocked the vote during the primary <-- greater import
#2 is in my view what caused Clinton to lose. I think she (and most everyone) underestimated how profoundly new registrations and then new voters changed the electoral math in Obama's favor. I think it has and will change the dynamic of the general election as well.
McCain, to his credit (or at least I'm giving him this credit) saw this, and realized that he had neither the charisma nor the gravitas to match Obama's feat. I imagine he decided he would be too threatened by a running-mate with the necessary gravitas, but figured a charismatic person who brought some shock-value to the table was better. He also saw that the mainstream candidates wouldn't give him this kind of uplift.
He also needed someone to "de-moderate" him and his policies, someone who would appeal to the base of the Republican party - something that he has historically not related well to.
Palin is a great choice because she has sass, is cute, and frankly is just too dumb to know better. She is able to get away with outlandish statements and absurd ideas because everyone has already written her intellect and experience off. She's just not judged on that basis, as was clear during the post-debate assessment.
One thing I don't imagine McCain really thought about is his own mortality, and whether his VP choice would ever really ever sit in the Oval Office.