McCain should have picked Hutchison.
Why?
1. Southwestern: This shouldn't matter, but she could help McCain in New Mexico and Colorado, even though there in his backyard.
2. Pro-choice: Now some conservatives would not accept this, but Hillary voters would have liked it. It would also enhance McCain's maverick image.
3. Economic Expierence: Well, somewhat, she was Texas State Treasurer.
4. She's a woman: She is a woman, and a tough woman, not a caribou barbie like Palin. It could infuriate Biden, as he would have to not look like he's attacking her. The same went with Palin, but she's dumb. Hutchison could murder Biden in a debate.
She wouldn't have helped in New Mexico or especially Colorado. BRTD is actually right on this one, that the neighboring state theory is bogus (unless the neighboring states are similar politically, which neighboring states often are, though Texas is not much at all like New Mexico overall or Colorado).
Reasons 2 and 4 would've indeed helped the ticket a bit with swing voters, but also turned off the GOP base. So, not much net help, if any.
Reason 3, ok, but how much does this really matter in a VP pick?
I actually don't think Palin was as bad of a pick as many people think. She at least energized the party base, which might've at least kept the election from turning into a mini-landslide (which is very possible if McCain picks someone unacceptable to the base and they revolt and fail to turn out). Obviously there was no one who McCain could've picked who would've actually won him the election.
She clearly did hurt with swing voters, but no VP is going to make a big difference with them one way or another anyway.