Palin et al. are probably going to claim that this phrase has something to do with what they meant by blood libel.
But that is NOT what blood libel means, and furthermore, the fundies among them all know the difference.
For people who study this stuff: "his blood be upon us and our children" is the blood CURSE--the accusation that "the Jews killed Jesus" and are responsible for his death, so his blood is on their hands.
What is even more intense is that the people said to have made that statement were WILLINGLY ACCEPTING responsibility for having taken actions that led to Jesus' death: stirring up the crowds to ask for him to be crucified.
So the irony is thick: Palin and her ilk ARE stirring up malleable/gullible people to take actions that have led to various deaths, but they are now whining that they don't deserve to have a blood curse laid upon them.
Then they invoke the completely different phrase "blood libel", one of the nastiest elements of anti-Semitism in history. As others have pointed out, blood libel was the ridiculous claim that Jewish people used the blood of Christians, particularly Christian children, to make matzo for Passover (and in other religious rituals). As inclusiveheart said in HeidiEight's diary, wingnuts are trying to draw a parallel that is more sick and selfish and ahistorical than I thought possible, even from this crowd. These masters of false equivalency are actually attempting to compare their being blamed for the deaths and injuries in Tucson with the way the Jewish people have been wrongly blamed for the death of Jesus. It's such a brilliant dogwhistle to their base, who gain such twisted pleasure out of believing they are the most persecuted people in the world, that Frank Luntz must have stayed up all night thinking of it.
And at the same time there is that whiff of anti-semitism that always lingers in the fundy world: Don't feel sorry for the Jewish woman clinging to life with a bullet hole in her head, feel sorry for us poor persecuted tbaggers who were innocently putting gunsights on maps and telling people to reload and pursue Second Amendment remedies and saying that liberals deserve to die and carrying signs about watering the tree of liberty with the blood of tyrants. We honestly didn't expect any unhinged person would actually DO IT...!
LBNL, progressive/liberal Christianity has long taught that the blood curse is NOT valid, the ROMANS killed Jesus (with the cooperation of some religious authorities appointed by the Romans) and that the Jewish people as a whole are NOT responsible and should NOT be blamed. Just one of many teachings fundamentalists hate us for.