While I agree that the situation in Iraq is deplorable and I'm not Kerry's biggest fan, do I detect a strong hint of "oh, woe" in your recent posts?
Vietnam already proved to the world that the US wasn't invincible. Hell, Afghanistan is proving it right now, too. The point, though, is that it is a question of will, not capability. If the American people would stand behind him, Bush could bomb Iraq into submission with minimal risk to our troops. Americans, not being the kinds of Neanderthals Bush wishes we were, will not stand for it and Bush knows it.
Whatever value we gained by the perception of invulnerability is probably still intact. If we face an enemy where that military power would serve against, that enemy would be defeated, provided the will of the American population was behind that fight.
As far as "why is Kerry running"? Who cares? Most important is "could Kerry be a good president"? Scratch that, most important is "Kerry is better than Bush".