I would give Iowa to Thune. Minnesota would be closer but still for Obama. Obama would still win the general election once Thune's social issue stances were revealed and he would lose ground with women.
Iowa may look much like South Dakota (flat-to-rolling terrain, sharp seasons, rural, very white populations), but otherwise the states are very different. Iowa has corn and dairy cattle (rather liberal for rural areas), and South Dakota has wheat and beef cattle (conservative tendency). Iowa is much more urban. Iowa may have no giant metropolises, but it does have several cities bigger than Rapid City.
Iowa and South Dakota usually vote very differently. They vote together mostly in blowout elections. Even in 2000, the states both voted for Dubya, but Dubya won South Dakota by about a 20% margin and Iowa by less than 1%. They did vote rather similarly in 1976, but American voting patterns were so different from what they are now that 1976 might as well be ancient history. South Dakota and Iowa voted differently in an election that the winner won with 426 electoral votes (1988).
Carter and Obama
Carter and McCain
Ford and McCain
Ford and Obama
(Ignore shades).
On your above analysis I believe you meant to write 2004. Gore carried Iowa by a whisker in 2000. Yes, I agree with you about 1976 being ancient history in relation to todays voting patterns. However I still think a republican can win in the Iowa of 2012. As far as 1988 goes the vote was close due to the farm crisis of the 1980s. Dukakis didnt do as bad here as one might expect.