Yes, but he's up for reelection in 2008. If it looks like the Democratic ticket is likely to win, he could terminate his reelection bid and RI Democrats could pick a replacement. Given that most of the other statewide offices other than governor are held by the Democrats, it shouldn't be hard to find a good replacement candidate.
Of course, the risk for Reed is that the ticket loses and he's out of the job.
Otherwise -- though it reeks of partisan wrangling -- if the RI legislature if Dem enough, they might be able to pass a bill calling for a rapid special election, as the Massachusetts legislature did in '04 when hopes that Kerry would win raised the prospect that Mitt Romney would appoint a Republican replacement for 2 years.