How would she explain how one of the architects of the Bush foreign policy team is now on her team?
They could finesse it easily enough. He was always rumored to have been a dissident, and is generally viewed as being a man of integrity by the average folks who decide elections. The press isn't going to dig too deep if he is her vp in any case.
One thing I have learned lately is that people who get their news from CNN and Oprah don't see things the way we do, they don't obsess about details of a man's record because they don't know them. If you try to tell them, their eyes glaze over. Their approach to picking a candidate is very intuitive; if they like you, you're in. If they don't, you're out. Your actual record or the context within which it was lived out doesn't play into the decision much.
She is not particularly likeable, and thats her weak point. But Powell is, and having him visibly on her team would do a lot to smooth off her edges. If Obama could get him on board, it would have a way of reducing his lack of experience as a factor, if he surrounds himself with people who are perceived as principled heavy-hitters. Like the way Powell is viewed by the general public.