It is very hard to unseat an incumbent president. Clinton was able to defeat Bush, Sr., only with the help of Ross Perot. Bush, Jr., "defeated" Gore (the next best thing to an incumbent) with the help of Ralph Nader and the Supreme Court.
So, please, Democrats, don't beat yourselves up! Kerry did phenomenally well. Bush won with the narrowest electoral margin of any incumbent president since Woodrow Wilson in 1916. In fact, it appears that Kerry would actually have won if all the ballots were counted, as argued by Greg Palast. There is a serious problem of excess "ballot spoilage" in minority precincts.
If Kerry runs in 2008 against whomever they've got to oppose him, his chances of victory are high--especially in the current administration wreaks the ruin I expect.
Take heart, carry on, and don't buy into Mr. Bush's self-proclaimed "mandate."