It would be too difficult and too risky.
If he lost, he'd be all but out as a Presidential candidate, and if he won, he'd have other duties to attend to other then campaigning and fundraising, and if he ignored his Senate duties, he'd be beaten up by everybody for not showing up for work. Let's not be hyporcitical, we did that to Kerry and Edwards all day long in 2004.
I'm not a Rudy guy either, at least not for President, but it's pretty clear why he doesn't wanna run.
I hope he serves as Secretary of State for whomever Republican wins in 2008. How would you like a Secretary of State that once kicked Yassir Arafat out of a party?
If he lost??
Hey, if he lost to Hillary in his own homestate, then how could he win a national election against her?
He who loses his own state IS a loser.
His not running makes him suspect to many.