She's apparently being considered.
I think it is a great choice. The Clintons are still admired abroad, and it will help the United States get back some of its international esteem that it has lost. She has celebrity and credibility.
I don't agree with Mike Allen's assessment that Obama is on his way (with Clinton as SoS) to creating a "team of rivals" a la Lincoln's cabinet. I think that is overstating it.
First of all, I'm not sure Clinton counts as a "rival" anymore.
In any event, she's not as vehemently anti-Obama as many of Lincoln's cabinet were anti-Lincoln.
I think it is also a good move for Hillary's career. It places her more front-and-center.
But I still say she should hold out for a seat on the Supreme Court. She would be a great replacement for Ginsberg.
Hillary's replacement in the Senate would be decided by David Paterson, New York's Democratic governor. I think Bill Clinton woold be an interesting choice, assuming he would take the position.
There's precedent for it: Andrew Johnson returned to the Senate after being impeached as President.