How should Hillary respond to the Bernie challenge?

[Mehmentum]

Outflank him on guns and immigration.  Going negative works, and if she can find an attack that works, she should definitely take advantage of it.  The electability argument is important, emphasize the consequences of loosing this election (a more conservative supreme court could reverse the gay marriage ruling and Roe vs Wade, Obamacare could be repealed, etc.).  All she really needs to do is win the people she won in 2008 + African Americans.  If she can do that, the nomination is her's. 

[Mehmentum]

Is Sander's age an issue? Reagan was 69 in 1980 and 74 in 1984 and lived to be 93.
Admittedly it could be an issue, but it didn't hurt Reagan, not much. Moreover, many people thought that Reagan was too conservative to be electable. Likewise arguing that Sanders is too liberal may end up being a mistake. I am not aware of any polls that show how he would do in the general election. Are there any?

Sanders isn't that much older than Clinton, so while age might be an issue Clinton isn't in the best position to take advantage of it.

The problem with general election polls this far out is that a lot of candidates have very low name recognition.  Polls with Bernie Sanders tend to have him sitting at like 36% with the Republican at around 40% because a lot of people have no idea who Sanders is.