Sarah Palin will exceed expectations. That won't be hard given that most people tuning in will be expecting a train wreck. As long as Palin can stand erect, not drool excessively, and speak in a language that sounds somewhat similar to English, she will be seen as exceeding expectations.
Joe Biden will be best served by ignoring Palin. Treat it as a press conference with a spectator standing closer than normal. Look at her when she is talking only occasionally when not taking notes, but don't react. When it is time to attack, attack McCain. Be mean, even cruel, towards McCain.
Palin will likely attack Obama. Biden should dismiss those attacks as "rote talking points" and defend Obama with uplifting prose.
There is a chance that Palin will go off on one of her rambling, semi-coherant policy babblefests. A trick to use once, and only once, is for Biden to begin his response by translating her babble into a simple declarative sentence ("I think what Governor Palin means to say is that Israel is and will always be an American ally.") and then respond. There is a risk of coming off condesending which is why I am not recommending this tactic. But, if done well, it can say that Palin is an idiot while still being gracious.