Panetta is qualified by nearly any measure you can think of, though it is true he does not have a huge intelligence background.  But given the choice between someone steeped in the CIA's recent activities and someone respected/capable but without direct intelligence experience, I think he chose wisely.

Hey, he does have some intelligence experience:

Panetta was instrumental in creating CSU Monterey by converting Fort Ord, where he was chief of operations and planning of the intelligence section when he was in the army, into the university.

The change Obama says he wants to bring to Washington will not happen without some cooperation from the Congress, so it seems like he ought to be handling these nominations with a little more finesse than it looks like he applied to this particular nomination.

All that aside, I continue to be amazed that a man who, while he was running for the nomination, could barely bring himself to even acknowledge there was a Clinton in the White House for 8 years, has shown a remarkable affinity for former Clinton administration personnel.

I would, at this stage, prefer someone who has not been steeped in the culture of the intelligence community, but has nevertheless been around the block a few times, understands the way things work, knows how to run an organization, and won't be tempted to close ranks when "outsiders" dare to bring a different level of objectivity to policy discussions.

There is something almost too good to be true about someone as outspokenly anti-torture as LP, and a Dem to boot (though with a bipartisan resume), getting the nod for DCI and then going on to actually get confirmed.

It's happened before where a Dem prez has nominated a reform-minded "outsider" to run the Agency, and the nomination ran afoul of the spooks and the Pentagon and the usual gathering of well-placed but timid Dems who did their bidding.  

Previously it was Pres Carter in 1977 nominating Ted Sorensen for DCI.  That one didn't make it to full confirmation hearings even, with the overt reason -- bogus concern over TS's use of classified gov't docs to write his Kennedy book -- masking the real reasons:  he was deemed too dovish, and would seek to engineer too much fundamental democratic change at CIA.

Naturally, as soon as Carter (and some timid senate Dems, like ML Byrd, Adlai Stevenson and one Joe Biden) began to feel some heat, he acted to cut himself loose from TS, and the nom began to quicky unravel.  

CIA lifers can be fiercely loyal to their own and deeply distrustful of outsiders.