Scott Horton makes the case, which I think is correct. There's obviously no question that Mukasey isn't someone I would prefer to see appointed as AG. But the relevant universe of options here is not "people qualified to be AG," but "people George Bush would...
Attorney General
I'm still inclined to think that Bush wants a fight, but there seems to be some chance that he'll go for the more confirmable Michael Mukasey. Jeralyn, persuasively, sees him.