The way I see it is.
Labor is going to be beaten in the 2013 election, I doubt there are too many that think Labor can win.
With Gillard at the helm we will have a more stable government until 2013. With Rudd the government will be unstable because of less talent on the front bench, and possibility that the Independents may stop supporting him, which will lead to an early election.
Rudd has a much bigger chance (if there is one) of defeating Abbott in the 2013 election.
So what would you do if you were a government backbencher?
Go for Gillard and certain annihilation, possibly bigger than NSW Labor's loss last year. Or.
Go with Rudd and still have a loss or a very small outside chance of a win (maybe 100/1), but possibly lose less members at the next election.
Put yourself in the backbenchers position.
For me personally I would go for Gillard for a more stable government and wait for the Neanderthals to bash down the castle gates in 2013.
Labor needs to change and what Rudd said about the faceless men/union movement is right. They need to reinvent themselves as a new progressive left leaning Liberal party, not to be confused with the