It's a disaster that she's retiring.
Why would I say that? Because as bad as she was, the best we can hope for is someone who is just as bad but 20 years younger. More likely, we'll get a "federalist" true believer who will seriously cut back on Congress's power to protect individual rights under Section 5 of the 14th Amendment, create an O'Connor-like randomness in the scope of federal authority under the Commerce Clause (undercutting Congress in areas like environmental regulation), and further limit the government's ability to adopt policies that inconvenience rich people.
The immediate focus, of course, will be abortion. I think that will be a mistake. It's an important issue, but it's still just one issue. (Of course, regular readers know that I think Roe was wrongly decided). And if, in the fullness of time, Roe were overturned, that would leave it up to the states to decide whether to ban abortion or not. Many states wouldn't. A number of other marginal states would, only to cause pro-choice moderates and libertarian conservatives to kick out of the legislature pro-life legislators who had previously been fairly harmless. Over time, I'm convinced that abortion would be at least as available in most states as it is today--sure, Mississippi will criminalize it, but how easy is it to find a doctor who will perform an abortion in Mississippi today?
What's likely to be more important when we have a new justice is not that the Court will strike down fewer laws (e.g., abortion laws, laws promoting religion, etc.), but that it will strike down more laws (affirmative action, environmental regulation, antidiscrimination statutes, municipal regulations in areas like health and economic welfare, etc.). And I think that even if the liberal advocacy groups and the Democrats in the Senate can force some compromise from the White House on the nominee, I don't think these less-publicized--but very important--issues of federal power, preemption, etc., are going to be the areas where Bush has to compromise.
I'm just hoping he picks someone smart who can write well. That would be an improvement over O'Connor. Maybe Michael McConnell.