A Bold Prediction
Actually I'd put the likelihood of this occurring at somewhat less than 50%, but I do think it's a serious possibility. Bush seems to be really disliked in the blue states, even by libertarian leaning moderates like me who voted for him last time. I can't imagine that he won't lose by a much bigger margin in most of these states than he did in 2000, and I can't imagine he is inspiring much new enthusiasm in the red states among those who didn't vote for him last time. So I think it's very likely he'll lose the popular vote. On the other hand, while Bush may not win a lot of new supporters, I think he inspires loyalty in a lot of his previous supporters, and I don't think Kerry is the right candidate to pry many of these Red state voters away from Bush. If Bush can manage to just win Florida and a couple of other swing states, he'll likely get the election.
The prediction futures markets seem to agree with me: on the Iowa Electronic Markets, the latest prices give Bush about a 50.5% to 51% chance of winning the election (despite Kerry's lead in current polls), but the vote share market has him dead even with Kerry with 49% of the vote each. The differences in the markets at www.tradesports.com are even more extreme: the latest prices give Bush about a 51.5% chance of winning the election, but only a 46% chance of winning the popular vote.
Prediction number two: If this happens, a lot of people will be very angry. There will be efforts to amend the constitution to get rid of the electoral college, but they will fail. I don't think the republic will crumble, but I think it will be pretty bad for public confidence in our system.