(1) (Sen. Kay Bailey Hutchison's) running for governor, for sure, probably, maybe, perhaps.And Secretary of Education Margaret Spellings is also considering running, though being coy about it. But I can't see her getting in if Hutchison does. As for Dewhurst, does he really think he can beat her either? That said, a primary race for her might be marginally tougher than the general election. Honestly, Hutchison is popular enough that if she decides to run for the governorship, it's hers.
(2) She will resign from the Senate sometime in 2009 to come home and campaign, allowing Rick Perry to appoint her successor. (I have always thought that Tony Garza had the inside track, but there is talk that Garza doesn't want to do it; he would have to run for the unexpired term in a special election.)
(3) David Dewhurst hasn't made up his mind whether to take her on in the Republican primary. Dewhurst thinks her vote for the Democrat-backed SCHIP bill is something he can use against Hutchison in a Republican primary. But he also realizes that he would face a backlash from Republican women and independent voters in the general election.
(4) Dewhurst will NOT run for Hutchison's Senate seat.
(5) Rairoad commissioner Michael Williams and former secretary of state Roger Williams are potential candidates.
As for her Senate seat, there doesn't seem to be a favorite to be Perry's appointment right now. But with whomever it ends up being, the race would be more competitive for Democrats than it ever has been against Hutchison.
UPDATE: Kay Bailey has confirmed to Texas Monthly that she will not run for re-election and is considering stepping down as Senator as early as 2009, regardless of whether or not she runs for governor, in order to allow her replacement to build seniority (but more likely, because she's running for governor).