It's pretty much another guilt-by-association tactic, and of the ones slung before, this one has the least merit. Not that I'm defending the governor, he does seem like a pretty bad guy. He's actually the fifth Illinois govenor in 50 years to be arrested on corruption charges.

As the article mentioned, they were pretty different to begin with and didn't work together much; if Obama's associations with a former terrorist and money launderer did not bother the American people, I doubt this one will either.
There is one thing I don't understand. Why is Obama out there saying he never talked to Blagojevich about the seat when the most exculpatory piece of evidence for him (Blago complaining that Obama wouldn't give him anything but graditude) proves that he in fact did? In order for that to be true, Obama had to have talked to Blago about this (at least someone from his administration definitely did). Axelrod said Obama talked to him two weeks ago on Fox and now the compaign claims Axelrod didn't know what he was talking about only after Blagojevhich is in trouble. It's tough to buy the retraction given the timing of it.
At this point there is no evidence Obama has done anything wrong and Blagojevich's statements back that up, so why go out there say that ? I can fully understand not saying anything (if he knew anything about the investigation) until after Blagojevich was arrested or revealing details about others they may be looking into, but why deny the obvious (especially if people are going to rely on the evidence they do) It seems to be his modus operandi that every time someone connected to him either does or says something stupid or has a questionable background Obama doesn't have a clue about who they were or what they did.
Jeremiah Wright
William Ayers
Father Pfleger
Tony Rezko
Jim Johnson
On Rezko and Wright, he claimed they weren't the people he thought they were and that Ayers was just some guy in the neighborhood (and then Obama thought he was reformed). Exactly how many times does he get to use the guilt by association defense before I can ask questions about either his awareness (if he truly didn't know) or his judgment and honesty? If all these guys are no big deal, why work so hard to downplay those relations to the point where he looks dishonest (specifically regarding Ayers and Wright) in doing so? Otherwise, just admit it and be done with it. It's not the relationships that bother so much as his inability to be honest about them and his consistent reliance on the "I didn't know" defense.
On the evidence available, he clearly has done nothing illegal or wrong in this case and any guilt implied would have to be association at this point. My problem is not that he did anything illegal, but that he goes out appears to deny the obvious when admitting does little harm and is consistent with the very evidence exculpatating him.
Part of the reason the association is being made is because of his connection to Chicago politics which has been a notorious bed of corruption at least since 1960 when a significant number of dead people helped win the state for JFK. As you said, since 1970 Blagojevich is the fifth governor to be charged with corruption. Blago's predecessor is still in jail for what he did.
There's no proof at this point outside of his accosiations that he was tainted by the politics there, so it's pretty much a very weak inference and without more than that I'm not going to hold it against him.
If nothing else like this happens anytime soon, it won't matter because people will forget about it. It's going to depend partly on how far reaching this thing is and what follows, but if this is all there is too it, I can't imagine harming him much outside of being a general pain in the ass for him. The people suffering the most damage (outside the obvious) would mostly likely be done at the state level, though I don't know what you do when both your past Republican and Democrat govenor's get charged with crap like this. It's not like the state Republicans can claim their the party will fix corruption in Illinois any more than the Democrats can. They all have dirty hands.
Oh, and before I forget, Jessie Jackson Jr. and the Internaional Service Employee's Union may be in deep trouble before this is done.