It's going to be interesting. People have compared this upcoming election to what we saw in 1980 (the Republican hope), seeing Carter go down to a weak economy, and to 1996 (the Democratic hope), seeing the damaging backlash a Republican controlled congress created on their otherwise good chances versus the declined popularity of Clinton.
In the former case, however, the Republicans had a strong candidate in Reagan to go against Carter, and in the latter, the economy picked up under Clinton in time for the re-election. Neither will be the case this time.
I think Obama will win based on this negative strategy, as it can only hurt the Republicans further, although the Republicans will do their best to paint Obama as negatively as they have been, of course. All this could change, of course, though, if the Republicans do get a strong charismatic leader to enter into the picture, but time is running short.
Sometimes, though, in such situations, where both candidates do not have strong voter approval, a third party candidate arises. This is another thing to watch for, especially once the primaries have been played out. While Ross Perot actually led polls at one point in the 1992 election year, this third party candidate may not win, but could take a huge chunk from either side, tilting the election in another's favor.