Considering the vigor with which she went after this thing, it had to be pretty serious...and sudden. If someone in the family was sick, then why the caginess about the reasons for withdrawal? The illness would become public sooner or later. Politically the withdrawal for reasons of family illness would preserve her future political viability.

A scandal involving a family member would be a better fit to the circumstances. As a matter of strategy, a scandal would certainly provoke a withdrawal from consideration as well as silence on the reasons for it. On the brightside--its probably nothing she did personally, but still potentially very embarrassing.

UPDATE: The New York Times just published a new account of what happened.

Problems involving taxes and a household employee surfaced during the vetting of Caroline Kennedy and derailed her candidacy for the Senate, a person close to Gov. David A. Paterson said on Thursday, in an account at odds with Ms. Kennedy’s own description of her reasons for withdrawing.

I don't buy this. It smells like a false trail. The media knows there is a story here, and so the governor's office and Ms. Kennedy needed to give them one. Something plausible but relatively innocuous.

Consider the following clue.

Several people who have spoken to the governor said he had decided on Ms. Kennedy some time ago. A Democrat operative with ties to Mr. Paterson said the governor told Ms. Kennedy last week that she was the choice, but that he would use the next few days to do “a little misdirection to keep the suspense up.”

If he had already decided--and that seems likely, the vetting would have been completed some time ago. There simply wouldn't have been any last minute revelations of this kind. Secondly, nanny problems only derail Republican nominees. Considering where we've just been with Tim Geithner, its inconceivable that a tax problem with a housekeeper would outweigh the political advantages that Caroline Kennedy brings to the table.

Sleight of hand.

UPDATE II: More conflicting reports.

Sometime in the early to mid afternoon, Kennedy “became aware of a personal situation that was occuring. It had nothing to do with Ted.”

The aide wouldn’t say what the personal matter was.

That sure doesn't sound like a tax problem with the help, does it? They're covering something, but as yet it is unclear.

Its not just conservatives dubious about all this.

Here's an interesting theory.

When news of his illness came out last year, the elder Kennedy made quite clear that he would like his wife of 16 years, Vicki, to inherit his Senate seat. And it's hard to imagine that such a succession wouldn't be at least somewhat complicated if his niece had been awarded a Senate seat thanks to her family name just a short time before. The emotional argument for retaining one Kennedy in the Senate, absurd as it is to me, would likely be strained beyond breaking if extended to two.