I remember getting up early one morning to watch the Columbia's first launch. It was extra early for me, because I lived (and still do) on the West Coast, and Columbia was launching out of Florida. It seems like millenia ago now. Its still hard to believe that this part of space history is now permanently gone. But while I was surprised, the shock and disbelief that I had when Challenger was destroyed wasn't as much in evidence this time.
There are three remaining orbiters - Discovery, Atlantis, and Endeavor. Work will go on with or without them, although I imagine all three of them will be grounded while NASA attempts to figure out what went wrong. The leading suspect is a gash on one of the wings that occured during the launch, and which some suspect may have been more severe than NASA believed (the camera and arm were not mounted in the shuttle for this mission, so apparently, no inspection of the damage took place while the shuttle was in space).
Its also unfortunate that the first Israeli astronaut was onboard the shuttle. The US and Israel have always had close ties, it would have been genuinely nice to see him make a triumphant return.
It also has undoubtedly not helped the perspective of some (note that word 'some') Middle Eastern residents. I've seen at least one quote attributing the disaster as God's justice upon us from someone in that area (meanwhile, a part of me notes that if it was God's justice, it was a pretty showy, yet otherwise useless "punishment" - note that I don't actually believe it was any form of punishment).
I am confident, however, that the space program will rebound. Hopefully, there will be a silver lining to this disaster, and perhaps the funding will finally be provided to build our next class of vehicle into the dark just beyond the sky.