I think it's VP or nothing for Hillary. I don't see why an imcumbent Senator from a large important state where she's very likely to be re-elected next time around would want to swap that kind of power and job security for a cabinet-level job where she'd be subject to being fired for any reason her boss sees fit. If Hillary were to accept a cabinet position and get dumped from it, she'd have a hard time either regaining her Senate seat or taking another stab at the Presidency.

Also, I don't think Obama would relish the possibility of having to fire Mrs. Clinton. The perception of payback would be there, even if the firing were fully justifed.