Actually, I think you're both right.
I think Palin is correct about the "middle moving right." If Obama, who is very much a centrist by '90s-'00s standards, is now seen as some sort of radical leftist by most Americans
Except he wouldn't be. For example Clinton wasn't really that "Centrist" during his first term, it was during the 1996 race and after that he began to triangulate and seek to become more moderate or "centrist", in part due to having to work with a republican congress, in order to regain his seat. People point to Clinton as a "Moderate Liberal" and then point to his push for Health Care, while failing to realize the reality that Clinton's attempted push towards Health Care came during his first term in which he was more to the left then he was by the time his re-election came about.
I think Obama's, rightfully, viewed as firmly on the left in this country with a varying degree of how far depending on what group you ask (typically the farther they are from him the farther to the left htey put him)
and the far-right Tea Party conservatives are now the mainstream rightwing, the middle will necessarily move to the middle of that dichotomy.
And to place the Tea Party as the "Far Right" while trying to portray Obama as Centrist is absolutely laughable. As a whole they are not calling for the wholesale immediete destruction of numerous Government institutions, such as the entire department of education, such as some hardcore libertarians that are more likely "far right" on the size of government scale. Their entire platform deals little if anything with Social Conservatism, and deals zero in regards to "religious right" type of social conservatism. Hardly "far right". Again, like Obama, its a solidly conservative movement that is viewed as more and more extreme the farther and farther left you are from it.
But Palin is sort of equivocating here. The fact that the middle is moving right, does not mean that they will be voting to their right. The middle will still be captured by the politician who is closest to the middle, regardless of whether it has moved to the right or left on the political spectrum.
Again, I think Palin's point is that her goal, and what she thinks could happen, is that Republicans don't falsely present a "moderate" message to appease "The Middle", but to instead articulate the message well enough to convince those in the middle that conservatism is the way to go.
Whether they're able to do it or not is still up for debate, and I do NOT think that Palin can be the person to do it.
Palin and the Tea Party are still viewed as much more extreme than Obama,
Disagree strongly here, but I'd actually love to see some legitimate polls done on the matter. I'd dare say that you'd see most that view the Tea Party as "extreme" are primarily on the left, those that view Obama as "extreme" are mostly on the right, and those in the middle would likely have greatly varying views. I wouldn't be surprised to see it relatively close, with it honestly not geetting out of the 1-4% range which would be so small of a difference that it'd make the claim that one is more than the other a bit useless.
not to mention that the Obama and the Democratic party have the weight of incumbency,
True on this that it tends to be a benefit, but not always. With the current anti-incumbency sentiment in the nation, if it continues through 2010 into 2012 it could be problematic. Even so, ultimately I'd say the incumbency is a net positive for them...just perhaps not as big as in the past.
and are hot on the heels of a healthcare victory that made the Republicans look all the more extreme and obstructionist.
Now this one is a bit of a reach here, wholey based on opinion. Polls still show a majority of Americans unhappy with the Health Care reform and wanting it repealed. Now, grant you, some of those are ones wanting stronger legislation but in those cases they even seem to be more upset with "whimpy" Democrats in their mind than obstructionist Republicans. Republicans additionally have the easy fall back that they COULDN'T be obstructionist...the Democrats over those months and months had a super majority in both houses and in the Presidency. The "Obstructionists" were DEMOCRATS, not Republicans.
Right now HOW the health care reform package and "victory" will play is very, very up in the air and I think its extremely premature to just be chalking it up as a "victory" in terms of electoral affects for either side, especially the Democrats.