I see two equally plausible–and conflicting–accounts of what is going on:
One theory is that Rehnquist has already communicated to the White House that he will resign soon and that he has agreed to defer his formal resignation until the president is ready to nominate his and O’Connor’s successors. There is no real evidence to support this theory, but it would explain why, contrary to what veterans of the White House Counsel’s office expected, O’Connor’s successor was not named immediately. It would also explain the third-hand rumors that folks at the White House fully expect Rehnquist to resign.
A competing theory is that Rehnquist has decided to continue for at least another year. Under this theory, his health would be stronger than some have reported, and he would have figured that two vacancies at the same time disserves the interests of the Court. One other note: A Supreme Court history buff like Rehnquist would surely be aware that sometime next year (on May 21, 2006, if my quick calculation is correct) he will surpass Chief Justice Marshall’s tenure on the Court.
Marshall was chief for his entire tenure (34 years, 156 days, I think). Rehnquist joined the Court in mid-December 1971 and has been chief for the last 19 years. According to one website, William O. Douglas holds the all-time record of 36 years, 209 days on the Court.