A few things to keep in perspective I think:
First of all, the "wrong direction but still supporting" contradiction makes a bit more sense when you consider that most of these people are sorting out what they see and know intellectually and what their primal fear is telling them. Bush has masterfully convinced a lot of people that he is the only one that can protect them from the Boogie Man, even if by all measures he's driving the country into the ground. Letting go of primal fear and letting reason seep through is a slow process.
A lot of people, though, like your water cooler crew (hey, and my water cooler crew, too!) are just numbskulls. Intelligent people, maybe, but with an inability or unwillingness to think critically. They are the reason that the demonic fucks in the PR and Marketing industries are so effective. But the news media really deserves a big chunk of the blame. Any biases aside, they have conditioned the public with their pseudo-objectivity by consistently reporting both sides of an issue as though they are equally valid, as though introducing facts that are unkind to one side is somehow biased. They end up just reporting what one side said, followed by what the other side said, and leaving it at that without providing any context or facts that might help a viewer sort out who's full of shit. So I think when people see an actual fact these days that doesn't conform to their party line they assume it must be a lie, because they never heard the fact mentioned by the crack investigative teams on the news. Combine this media neutering with the Right Wing Noise Machine that dominates the talking head shows, and we have a huge problem. Yea, it's all pretty depressing, but all we can really do at this point is crank up the Left Wing Noise Machine that has been sorely lacking and push back. The bonus is that I actually do believe the truth is on our side, and sunlight is the best disinfectant. With the help of reality, which is caving in around Bush, I think it's just a matter of time until what people see in front of them trumps what they're being told and "conventional wisdom" starts to break in our favor.
As far as the polls... The Electoral College map has been fluctuating about as wildly as the rest of the polls, and has even been in Kerry's favor several times recently, depending on the poll and the planetary alignment in question. It's amazing how different sites who are supposedly all averaging the mainstream poll data all come up with such drastically different map predictions, so I don't know what the hell to make of them. But the polls themselves deserve scrutiny, too. You should definitely read Ruy Teixeira, who is a polling expert. He drops bombs on Gallup on a regular basis, and really helps to keep these polls in perspective. Be wary of polls who's polling samples are heavily weighted with Republican party ID when no such advantage is justified (like Gallup), and be wary of polls of Likely Voters, which only count people who voted in previous elections, excluding most young people and many disenfranchised minorities who are far more likely to show up to the polls this time around.
Seriously though, Colin, I know your depressed as hell about the state of things, and I am, too, but NC most definitely is NOT Oklahoma, and even making it close will siphon resources from other places the RNC really needs it. It's a fight worth fighting.