That is surely the end of her run. If all it takes is a quick YouTube check the media and Republicans will be all over this.
I wonder.
Everyone knows that what she said is true. It's essentially a propaganda point to say that judges don't make policy, and the only people who believe it are either ill-informed or highly invested in the propaganda. That's a sizable number of people. The latter group includes everyone who heard Clarence Thomas say he has "no opinion" on Roe v. Wade and smiled at this response, pretending to believe it while supporting him because they knew it wasn't true.
The salience of this argument depends on the salience of Republicans to turn it into a killer attack point, and I question its effectiveness. Republicans will find a common point of attack on any nominee Obama comes up with and run it through the "activist judges" filter. It's good this came out sooner, because Sotomayor can be prepared for when she's asked about it.
But while this doesn't disqualify her, there is the issue of whether Obama tries to avoid controversy. I think that question is more open on this specific attack than people would think, or it would be if the Senate were closer. We shall see. He has been very risk-averse until now.