Go with God, Pope Benedict.
This is undoubtedly the biggest religious news in a long time, and, much to my unceasing shame, I can think of nothing substantial to contribute to the discussion. I can only reiterate the commonsense observation that has been made at least since the death of John Paul II, namely that the papacy no longer reflects the largest and most vibrant Catholic constituencies.
As to the frequent and melodramatically dire warning that the election of a "third world" pope might bring about a conservative backlash that could undermine Vatican II, of course it could. But this reflects precisely the same problem as minority domination of the papacy: the guiding vision of a liberalizing strand of Catholicism which predominates in the West is foisted upon the majority of Catholics who may or may not share that vision. The papacy ought to reflect the Catholic Church, both through continuity with its honored traditions and through representation of the needs of the parishioners.
(Of course, in truth, my biggest hope is that whoever is elected will be someone willing to work closely for the bettering of relations between the papacy and the patriarchate in Constantinople. Fingers crossed.)