Pete's done a great job, and I love the fact that he makes unconventional decisions ("goes against the book") even when it doesn't work out.
I wouldn't extend him this minute, but he's earned top candidate status.
I hope that fans don't overreact to the Reds' recent surge, though. The rotation is still a mess--even if the bullpen has come together recently. The question on the manager in 2008 and beyond depends a little on the direction of the team. I'm not a big fan of the Jocketty/LaRussa rumors (even if true, I'm not sold on them coming to Cincy), but if the Reds determine to go a route like that--by hiring a new GM, for example--the new GM ought to have the ability to hire his own manager. You can't tie a GM's hands by sticking him with a manager he hasn't selected--you're already probably giving him a short leash to improve the team.