Anytime the SC overturns a lower court ruling, it's a big slap to the judge or judges responsible for the ruling. The SC doesn't usually criticize the lower court in its ruling so that makes this slap sting all the more.
However, there is very little chance that this will derail Sotomayer's nomination.
The only way I can imagine such a result would be if this decision results in intense media coverage of the underlying case and Sotomayer's participation in the overturned ruling.
I don't think that is going to happen to the degree that public opinion will coalesce around the notion that Sotomayer is not qualified to be on the SC.
As much as I would like to see Judge Sotomayer denied the opportunity to join the SC, I don't think her appointment will make much of a difference.
Souter has so reliably voted with the Court's liberal bloc, that Sotomayer in replacing him isn't going to tip the current balance, anymore than Roberts replacing Rhenquist did.
Alito replacing O'Connor was much more significant.
John Roberts - conservative - 54
John Paul Stevens - liberal - 89
Antonin Scalia - conservative - 73
Anthony Kennedy - swing - 73
Clarence Thomas - conservative - 61
Ruth Bader Ginzburg - liberal - 76
Stephen Breyer - liberal - 71
Samuel Alito - conservative - 59
Aside from being pretty old, Stevens hinted that he would retire if a Democrat succeeded George Bush. I would bet he will do so before Obama completes his first term. A reliable liberal vote, his replacement with another liberal will not tip the scales.
Judge Ginzburg's health is a big question (treated for pancreatic cancer in Feb 2009) and so retirement in the near term is a real possibility, but again replacing one liberal with another will not result in a shift.
I'm unaware of any other justice with health problems, but if Obama serves two terms, Scalia and Kennedy will both be on the verge of 80 by the time he leaves office. The opportunity to replace either of these justices will result in a shift to the left, and a pretty reliable bloc of 5 liberals.
Obviously, anything can happen between now and 2012 or 2016, but Obama's chances for creating a long lasting liberal majority on the SC are less than even.