This is also discussed
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1) Is this ad even remotely acceptable, even for usual negative campaign tactics?
I consider this ad suffering from the argumentative fallacy of association. It attempts to say "Michael Moore is left wing, and Kerry is left wing as well. You wouldn't want someone who acts like Michael Moore in office, would you?" Moveon.org and Michael Moore are not connected to the Kerry campaign at all. I haven't heard Kerry mention or offer them any positions in the white house.
Kerry holding the Bush administration responsible for what Ann Coulter said would be the exact same as what this ad is trying to do.
Anyone who knows about the Nazi parts is smart enough to know that these clippings were not supported by Moveon.org. They even apologized and took them off their web.
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2) Would an expected backlash from this ad help Kerry or hurt Bush?
Neither. The real people who are going to decide this election won't even look up Moveon.org or Bushs website. They're just going to cast a vote for whomever they feel like. If it reaches mainstream parts of the news, like Hardball, they're going to tear it apart, which would be bad for Bush. Chris Matthews would have a field day (where ever he is!).