Yep, he's running in 2008.
I think he definitely has a shot. He's clearly trying to continue the legacy of Paul Wellstone's seat, so he won't need to compromise his liberalism, and has hometown cred. He's not quite as leftish as Wellstone was (one somewhat critical piece by Paul Hogarth noted that he supports NAFTA and was somewhat pro-Iraq in 2002). I honestly doubt that be a huge problem, considering Al's such a prominent Bush critic.
No, the most important issue is ensuring that he develops a strong relationship with the party apparatus in the state so that they feel like they have a say in his candidacy and his policies. High profile candidates have a way of overshadowing the bottom-up mechanisms that are the lifeblood of politics. He'll need to be careful to ensure that even if his celebrity gets him media exposure, he still takes the time to connect with the people who will be trudging around in October and November trying to convince other people to vote for him.
He does that, and I think the Senate will be a far more interesting place in 2009.