Reading the tea leaves, it seems clear that there will be a brutal confirmation battle regardless of who is nominated. At this point, a confirmation battle will be supply-side driven--the interest groups have the money already, and they are going to spend it one way or the other. And then try to raise some more. And the politicians are going to try to raise money by pandering to these same players. No one is going to roll over on either side just because a particular nominee is thought to be "moderate" rather than "conservative".
The credentials or qualifications of the particular nominee under consideration will be largely beside the point.
So, the same nasty fight is going to occur regardless of who is nominated, and be just as nasty and expensive, regardless of who is nominated and the particular perception of whether he or she is moderate or conservative. So, it seems to me, the Bush Administration would be smart to simply nominate the best person that they want, and not be tricked into thinking that they can somehow avoid a nasty confirmation battle by nominating someone with a more "moderate" perception.
So if there is going to be a fight (which there undoubtedly will be), they may as well at least make it someone worth fighting for.