First of all, Tony Blair was never really a candidate. He got backing from people who hadn't really thought about it much, including I suspect himself, but once it became clear that the centre right wanted one of their own, he was toast. In any case, the small states were always going to be unenthusiastic about a leader from a large state taking on the role. So, of the 27 member states, the heads of government of Austria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Ireland, Portugal, Slovakia, Slovenia, Spain and the UK are ruled out for being in the wrong political family. That leaves 13 countries. But we can also rule out France, Germany and Italy because the small states are unlikely to agree to an EU President from a large state (and anyway Sarkozy, Merkel and Berlusconi are not interested). That leaves 10. But we can also rule out the newest member states, who are not sufficiently known quantities as yet; there will in due time be a Bulgarian, Latvian, Lithuanian, Maltese, Polish or Romanian candidate, but that time is not now.
That leaves only four countries: Belgium, the Netherlands, Luxembourg and Sweden. The Swedes' stock is high, but they have the disadvantage that they hold the EU presidency at the moment and it looks really bad if you are chairing the meeting which selects you for promotion. That leaves the Benelux prime ministers, Balkenende, Juncker and Van Rompuy. Juncker is the longest serving PM in the EU (since 1995), and is personally well regarded, but his country is not; where France, Germany, Italy and the UK are too big, Luxembourg is really too small, at least for the first holder of the post. That leaves Balkenende and Van Rompuy.
Balkenende is the second-longest serving PM in the EU (since 2002), which has given him time to put a lot of people's backs up; the then Belgian foreign minister, now European Commissioner, Karel De Gucht described him with brutal accuracy as "a mix between Harry Potter and a rigid bourgeois without charisma" (and this is not a linguistic problem as they share the same native language). Van Rompuy on the other hand is rather sweet and writes haikus on his personal website. More to the point, in his ten months as prime minister he has rescued Belgium from the point of institutional collapse which it reached under his disastrous predecessor, and thus has a proven record of getting people with different native languages and very different political perspectives to work together. He won't be a tremendously high profile EU president, but he will be a consensus-building figure who will make his bits of the institutions work and not interfere with other people's turf - be that member states or other senior EU officials.
I'm not a fan of his party, but I am rather a fan of Van Rompuy, and although most of the reasons why he will get the job are actually bad reasons - there is really no good justification for excluding non-Christian Democrats, or anyone from big, tiny or new member states - I think he will actually do it rather well, which is the best reason imaginable to give it to him. The downside is, of course, that Belgium will then need another prime minister, which raises the depressing prospect of Leterme coming back to screw things up again.
This also improves the chances of David Milliband getting the foreign policy job, whose fate matters much more to me. Again, most of the reasons why are bad - the Socialists get the foreign policy job if the Christian Democrats get the top spot, and then there is a real shortage of Socialist foreign ministers that a) anyone has heard of and b) would be personally and politically acceptable (Bernard Kouchner being the best example of someone who clears the first hurdle but not the second). However, while Milliband may have pulled his punches a bit in the current vicious Labour internal struggle, he is a credible at European level (and not tainted by Iraq to the extent that Blair would have been). The question really is does he want it?
(See also discussion here. And you'll note that many of the above links go to the excellent blog of the Economist's David Rennie, which is syndicated to Livejournal, though with technical difficulties, as econ_charlemgne.)