The following is a rush transcript of the January 16, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace and this is "Fox News Sunday."

(BEGIN VIDEO CLIP)

WALLACE (voice-over): He is making waves for his tough approach to cutting taxes and spending in his state. Now other governors are following the example of this rising political star. We'll sit down with the Republican Governor Chris Christie of New Jersey.

Then the battle for the 2012 GOP presidential nomination heats up. We'll talk with one of the most likely front-runners, Former Minnesota Governor Tim Pawlenty. Christie and Pawlenty, only on "Fox News Sunday."

Also, we'll get an update on the tragedy in Tucson and we'll ask our Sunday panel if the rhetoric from the memorial service will change the political reality here in Washington.

And my favorite power player of the week dishes up love one ladle of soup at a time. All right now on "Fox News Sunday."

(END VIDEO CLIP)

WALLACE: And hello, again, from Fox News in Washington. We'll talk with our guests in a moment, but first, the latest on the tragedy in Tucson.

The condition of Congresswoman Gabrielle Giffords continues to improve. Also, authorities discovered a video made by the alleged gunman Jared Loughner.

In a strange development, one shooting victim was taken in custody after making a death threat during a town hall meeting. For more, let's bring in Fox News Correspondent Alicia Acuna who is in Tucson -- Alicia.

ALICIA ACUNA, FOX NEWS: Chris, the team treating U.S. Representative Gabrielle Giffords says she is making remarkable progress.

Most recently, doctors say they performed a small surgery to remove the breathing tube that was going down her neck and they replaced it with a tracheotomy tube to clear her airway and free her of the ventilator. University Medical Center says Giffords is following complex commands, such as removing her husband's wedding ring and putting it back on.

In the meantime, police say on the night before the shooting, the alleged gunman had film developed at a Walgreens that showed Jared Loughner holding a Glock 19 semi-automatic pistol while wearing a G- string.

And Pima County Community College released a Youtube video it says prompted the school to suspend Loughner in September. In it, Loughner is heard rambling about students being tortured and teachers receiving illegal pay.

And in a bizarre twist, one of the shooting victims was arrested while attending a television town hall meeting and placed under mental supervision. Pima County sheriffs say James Eric Fuller, who was shot in the back and knee, didn't like something said by a Tea Party representative at the meeting, took a photo of him and said, "you're dead."

Friends and family gathered Saturday for a memorial service held for 79-year-old Phyllis Schneck, who was one of the six killed at the meet-and-greet with Giffords. Schneck moved to Tucson from New Jersey to escape East Coast winters.

Now, three patients remain here at University Medical Center. Two are in good condition, and Giffords remains in critical condition -- Chris.

WALLACE: Alicia Acuna reporting from Tucson. Alicia, thanks for that.

Now one of the most controversial figures on the political scene. States across the country face hundreds of billions of debt from overspending, the impact of the recession, and federal stimulus money running out.

But one governor stands out for cutting programs and taking on public employee unions. New Jersey Governor Chris Christie, welcome to "Fox News Sunday."

GOV. CHRIS CHRISTIE, R-N.J.: Happy to be here, Chris.

WALLACE: Let's start from the fallout from Tucson. Congress goes back to work this week, and Republicans are trying to figure out how do they carry out their mandate to oppose the Obama agenda while also being sensitive to a country that is still grieving. How do they walk that line?

CHRISTIE: Well, first of, I don't think they look at it as opposing the Obama agenda, first and foremost. They got elected on a set of things that they were promising to do. So they should come down here and now get back to work and do their job.

They set forth a whole number of things they wanted to get done for the people. People put the House in their hands. They now need to get to work.

WALLACE: Do they need to pull their punches at all because of the event of Tucson and sensitivity about discourse in this country?

CHRISTIE: I think what they need to do is to be straight and to be candid with people. Now, that doesn't mean to be nasty and vitriolic. I think that the two can be divided. Be straight. Be honest. Don't varnish it. But there is no reason to be nasty and vitriolic about it either.

WALLACE: You praised President Obama for his speech in Tucson for trying to bring the country together, but you criticized Sarah Palin for her video for focusing on the media's attacks against her. And you also criticized her for avoiding unscripted situations when she's dealing with the press. For instance, that video was eight minutes. It was simply a video she put out. You say if she doesn't open herself up, she will never be president.

CHRISTIE: Yes, listen, this is just what I feel. I mean, I think -- I think people learn the most about you during campaigns about how you might govern. And the way they learn about that is in those unscripted moments when you're not being handled or told what to say, but you have to react to situations like this.

And so really it wasn't a criticism of her. It was an observation. In that interview with The New York Times, they asked me about what I thought about the various candidates. They brought up her name.

And I said about all candidates that you really learn about them in the unscripted moments. And if you avoid the unscripted moments, I don't think that the American people will trust their instincts about whether you, in fact, would make a good president or not.

WALLACE: You say that you agree with the president that we have to be more civil. But, my guess is that a lot of people in New Jersey might be surprised to hear you say that. Let's take a look at a town hall meeting where you confront a teacher. Here it is.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: You're not compensating me for my education and you're not compensating me for my experience.

CHRISTIE: Well, you know what? Then you don't have to do it. I mean, the simple fact of the matter is --

UNIDENTIFIED FEMALE: Teachers do it because they love it.

CHRISTIE: Well, then --

(CROSSTALK)