Is the midwest crucial for victory?

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That's why I think a Feingold / Bayh ticket has promise. If they take IA, WI, MN, MI, OH, and PA, they win.

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A Republican would never win Minnesota while losing Iowa, Wisconsin and Ohio. We are the most Democratic of those states.

What if he's from MN?

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This is how I see the 2008 battlemap right now assuming a close election in the popular vote:

Dark blue and dark red states would take a blow out of 1932 or 1984 proportions for the other party to win.
Light blue and light red wouldn’t be a total surprise for the other party to win, but they would have already have won the election because of other States if they get them unless the favored party fails to do anything to hold them.
The gray states are the battleground.

You're ignoring home state advatage for someone like Bayh.