Why does everyone think Palin would win? She currently trails Obama by about 20 points. There is no way Bayh would get anywhere near that, not even double digits is likely. And a good chunk of his vote would come from anti-Obama people who could never vote for Palin anyway. I have a tough time seeing him eat into the Democratic base, reminds me of that "Joe Lieberman as McCain's running mate would bring over TONS of Democrats because so many Democrats love him!" garbage.
It'd look something like 1980 in reverse with Bayh being John Anderson.
IIRC, the last PPP poll only had her behind by 8 points.