Classifieds. CraigsList is not the be-all end-all of buying/selling things locally online. It may be a tough nut to crack, but it won't be hard to radically improve upon their horrible user experience. I would love to see some competition in this space.
Not going to happen. Craigslist is at that early Google period where everyone who uses it for the first time never looks back and is uber-loyal to the brand. A slick competitor with a great interface and new tools still has to climb that huge Ebay/Facebook-style mountain (no users no stuff, no reason)
Just make sure that when you launch - that you're not targeting SF/NYC.
(I will admit - there is local competitors that you would have to beat in most markets - so it's still tough - but it's not always cl.)