None of this makes any sense
In 2006-2007 period, very few saw Obama as a credible theart until Iowa. Hillary was treated as the de facto nominee since the 2004 election. She did not view Obama as a theart at all.
Obama himself did not see himself as a canidadite until Henry Reid and Chuck Schumer encouraged him to run.
And blow the race? Hillary was the best polling Democrat aganist all possible republicans (until Obama started winning the primary).
Hillary was seen as the de facto next president by just about everyone until Obama came out of no where.
A better timeline idea for Biden 2008 is to have Bill Clinton be engaged in some scandle where Hillary chances are disminshed. And I would have Biden be friends with Obama while both are senators so Obama decides not to run. Obama said Biden was cold to him in the senate
Obama was a threat, it's just that no one saw him coming (compared to Edwards, who really wasn't a threat, but everyone thought he was).
Here, Hillary would be the overwhelming favorite to win the nomination, but she's the underdog in November. Remember, the financial crisis and recession has not happened yet.
Also, Biden doesn't have the easy path you seem to be thinking he has. Obama hasn't completely ruled out running yet, there's at least one other possible strong candidate in the Democratic field waiting in the wings (Gore, perhaps?), and like Clinton, he's currently an underdog in the general election (especially against McCain).
But she wasn't the underdog yet. Even before the housing crash, Hillary was seen as likely to beat any Republican. 2006 really soured the country's mood on Republicans
