Mark did face John in 1996 and lost by only 6. It would be interesting to see this matchup again, though from what I heard Mark seems much more likely to return to the governorship in 09.
1996 was a good Democratic year, but Virginia was much more Republican then. (It went Dole in a big Clinton win.) Mark Warner was also less well-known and hadn't achieved his massive popularity as governor yet. Would he beat John Warner? I'm not sure; I would give him a 50/50 chance.
That said, he'll probably run and win the governorship in 2009 rather than Senate in 2008.