The following is a partial transcript of the Sept. 30, 2007, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: After months of warm-ups, we're now in a sprint to the start of the 2008 presidential contest.

And to tell us what's really happening in the first two contests, we're joined by, from Iowa, David Yepsen, chief political correspondent for the Des Moines Register, and from New Hampshire, Boston Globe political correspondent James Pindell.

Gentlemen, let's start with the Republicans, and let's start in the first state, Iowa.

David, according to the RealClearPolitics average of recent polls, Mitt Romney has a commanding lead, beating Rudy Giuliani and Fred Thompson by 2-1. David, do you see — how do you see the GOP race in Iowa?

"DES MOINES REGISTER" CHIEF POLITICAL CORRESPONDENT DAVID YEPSEN: I agree with that. I think that Mitt Romney is way ahead. And I think there's a lot of Republicans who are trying to sort out who else either might be in the race — Fred Thompson is now in. He's trying to sort of restart himself here a little bit in Iowa.

There's a lot of Republicans who are — they're not happy with this field and they've been looking for another candidate. Now with Newt Gingrich out of the race, they're going to have to focus on this field that's here.

So I agree Mitt Romney is ahead.

WALLACE: Let's move on to New Hampshire, James, where according to the RealClearPolitics average of recent polls, Romney, former governor of the neighboring state of Massachusetts, has lost his big lead and is now just barely ahead of Giuliani.

James, what's going on in New Hampshire?

"BOSTON GLOBE" POLITICAL CORRESPONDENT JAMES PINDELL: Well, the bottom line is that we are in a very intense three-way primary, and the bottom line also is that if anyone tells you who's going to win the New Hampshire primary, they have no idea what they're talking about on the Republican side.

Just look at the candidates. You do have Mitt Romney, as you said, the former governor of the neighboring state. They're sharing the same media market. Most people in New Hampshire watching this show are watching it from a Fox Boston affiliate.

Then you have Rudy Giuliani. If there's any early state with a natural constituency for him, it would be a state very much concerned with taxes and not so much concerned about abortion or his own family life.

And then, of course, you've got John McCain, who could argue he won New Hampshire because he's already done it before.

So clearly, we're in a three-way, very hardcore battle here, and it's really a toss-up.

WALLACE: All right. Speaking of three-way battles, let's turn to the Democrats in Iowa and go back to the polls. They show a very tight three-way race among Clinton, Edwards and Obama.

David, take us behind those numbers. Who seems to have momentum among the Democrats in Iowa, and who's maybe losing some altitude?

YEPSEN: Well, I think John Edwards has lost some altitude, as you put it. He was at one point in the campaign — he was ahead in Iowa. He did well here two years — or four years ago. He finished in second place. So I think the Edwards people are kind of concerned about that positioning.

Senator Clinton, Senator Obama have moved up. But here in recent weeks, this race has been static. All these polls essentially show a statistical tie for first place.

And I think that's because the Democratic caucus-goers generally like their choices and they're really struggling to sort out who they might be.

I don't count out Bill Richardson, Chris Dodd or Joe Biden from this mix either, because all of them have got a good game going in this state.

WALLACE: Let's move on to New Hampshire and the Democrats where, again, according to the polls, Senator Clinton has moved on to a commanding lead, better than 2-1, over Obama.

James, is that the way you see it? Is Clinton that overwhelming a favorite now in New Hampshire?

PINDELL: That's right. The bottom line here for Democrats is that Hillary Clinton is dominating nearly every local metric you can have.

Even other campaigns concede that she has the most endorsements, the most powerful endorsements. She has the most experienced staff. She not only has a lead in the polls, but she's growing on that lead.

That said, there still is a chance for Barack Obama to come back, particularly in this state. And if everything goes well, John Edwards also has a shot.

WALLACE: Let's talk about Barack Obama, because as we've seen, he leads Democrats and has consistently led them in fundraising and also in attracting big crowds of people to his various rallies. But he's continued to lag in the polls.

David, the Obama camp says that he is tapping into new voters who haven't typically gone out to caucuses or primaries. Do you see any signs that he's under polling and, in fact, he's stronger than he appears to be?

YEPSEN: No, I don't. I mean, I know that's their spin, but historically, the caucus-goers in Iowa are older than many of these Obama crowds. The dynamic of the caucus is different, too. You've got to win delegates at a caucus.

And so you can turn out a rally of 7,000 people in a college town, but whether you win that caucus by 1,000 votes or by 10,000 votes, you still get the same number of delegates. So I think — and Senator Obama recognizes this. This is why he's campaigning in a lot of small towns around this state.

Senator Clinton needs to start doing more of that.

WALLACE: James, what about you? Do you get a sense that Obama may be tapping into voters that aren't being reflected in the polls and, as his camp says, is actually stronger than we think he is?

PINDELL: Well, I think what's key to understand is that, of course, New Hampshire allows independent voters to vote in the primary.

And recent polls have suggested that two-thirds to 70 percent of these independent voters are likely to vote in the Democratic primary. And because of that, what we really see here on the ground is that it's almost like a general election race between Hillary Clinton and Barack Obama.

General election — of course, Democrats try to drive out Democratic turnout. Republicans try to drive out Republican turnout.

In this case, it's Hillary Clinton really trying to focus and target a Democratic base, while Barack Obama has been really setting his sights on these independent voters and seeing that as his base.

WALLACE: Let's turn, if we can, gentlemen, to Fred Thompson, the late arrival in this race.

And let's go first to you, David — your sense of how Thompson is doing on the stump and whether she's shaking the GOP race up.

YEPSEN: No, I don't think he's shaking the GOP race up at all. I think he had a bad rollout on his first big trip here. Even some of his own people weren't that happy. It was about a B-minus-type rollout.

He's back in the state now and trying to sort of redo this and get the thing jump-started a little bit. But conservatives were putting a lot of hope on him as someone who could unify and really lead them, the next Reagan, and so far he's not met that standard.

WALLACE: And, James, your sense of how Fred Thompson is playing up in New Hampshire?

PINDELL: Largely the same picture. You know, he was built up to be the next Ronald Reagan, and I'm not sure Ronald Reagan could live up to those expectations in '76 or 1980.

But on the ground, people were very excited for him to enter the race. And after they saw him, or met him or the campaign got started, they were just kind of shrugging their shoulders. They weren't saying negative things. They certainly weren't as impressed as they thought they were going to be.

WALLACE: Finally, let's look at the calendar, which is so important and has seemed so confused. What we hear is that when all the jockeying is done, Iowa is going to move up perhaps to Saturday, January 5th, or maybe a day or two earlier, and New Hampshire is going to vote three days later on Tuesday, January 8th.

David, first of all, is that what you're hearing? And secondly, if it does shake out that way, that Iowa is on an afternoon in — a Saturday afternoon and New Hampshire is three days later, does that make Iowa more or less important?

YEPSEN: I do think that's the way it's going to shake out. I think it will be Thursday the 3rd or Saturday the 5th.

I think the effect of all these other states moving these contests up has just enhanced what's going on in Iowa and in New Hampshire. The candidates think that. I mean, look at the time and the money that they're putting into these two states.

And so I do think it has the unintended consequence of making Iowa and New Hampshire more important. A candidate simply has to do well in these states in order to play in the big contest later on.

WALLACE: And, James, your view on this compressed schedule with South Carolina and Florida, the Super Tuesday in rapid succession. What does that mean for the cloud of New Hampshire?

PINDELL: I agree with David. I think a year ago, smart people could disagree on this issue.

But now, if you look at where the campaigns are clearly spending their time and their money — look, I was chasing five candidates in New Hampshire yesterday — it's obvious that this is where the battlegrounds will be, and it's obvious that these candidates feel that Iowa and New Hampshire are more important.

WALLACE: Gentlemen, we're going to have to leave it there, but we'll check back with you as the campaign goes on. Thanks for talking with us today.

PINDELL: Thank you.

YEPSEN: Thank you, Chris.