My gut reaction is that at least part of this is due to the fun and games taking place with the resignation of New Jersey Governor Jim McGreevey -- carefully timed to prevent voters in the state from having an opportunity to vote on his successor at any time before the original term of office expires. This is the second major manipulation of New Jersey elections in the last two years, the first being the replacement of senatorial candidate Frank Torricelli on the ballot after the normal deadline for doing so when it became apparent that he was way behind in the polls. This sort of thing is generally guaranteed to produce a certain level of disgust with the party involved (except maybe in Chicago) and could well be producing a backlash that is hurting Kerry.
My gut also says that a chunk of this is due to the CBS/Rather/National Guard memo story that continues to go around, largely due to CBS insisting that the memos are "authentic". (This was downgraded to "accurate" today in a statement by CBS News President Andrew Hayward.) The problem is that the memos look -- to the naked, informed eye -- like modern forgeries, so much so that you can superimpose them on a document trivially created and printed out using Microsoft Word and see no difference that can't be explained by a few generations of photocopying.
Essentially, CBS News is saying to the voters "Who are you going to believe: us or your own eyes?" And I suspect that swing voters are tempted to believe their own eyes, which causes them to view this as a particularly clumsy partisan attack on Bush, no matter what they might actually think about his National Guard service.
I could be wrong, of course.