Just my prediction, but what I see happening is the Republicans getting their near or full fillibuster-proof senate by mid-terms or 2008. As a result, you will see even more staunch right legislation being pushed through. Bad.
The Dems will practically implode, and a third party will become more prominent as a result. The Dems are losing control, and until they get their stevestojan together, they will continue their downward spiral. Bad.
The Republicans will screw up, and push stuff too far to the right. This will shift the voters away from the Republican Party, but since the Dems still have not caught on, those voters will be looking at the alternatives outside of the "big two."
It will take a little while, but things will start to level out. I hope by then we will have more than two parties with major support.