First, Bernie (unlike Obama) didn't get in to politics planning to make a presidential bid. Ergo, he can't run from some of the positions and labels that were palatable to a smaller constituency.
So, yeah, he's not going to be able to run away from his declaration of being a socialist. He doesn't have to scream it in every ad, but he can't run from it either.
But there's a much bigger issue here that you're not thinking about:
The first one is HUGE and few people (outside of career political operatives) think about it. In order for your candidate to win, people have to physically vote. And that's a pain in the ass. A lot of people don't do it. They stay home. What we know, or at least what I (someone not particularly well-educated in this matter) know, is that people SUCK at voting against someone. You saw this in the Wisconsin recall and in both Kerry and Gore's bid to oust Bush. People can hate Trump (or insert your republican of choice here) but it doesn't get anyone excited to go and vote for the other guy. This happened with Romney too. People HATED Obama, but they didn't LIKE Romney. It's not enough to do just want to vote against the competition. You have to actually be excited about the candidate you're voting for, not just antagonistic towards the guy you don't want to win. Otherwise, too many people just don't bother.
All I can say about Clinton is that I like her better than I like Trump. I am not excited about anything she says, I can't really remember anything about her positions, I don't actually know much about her despite being rather savvy. It is just an in-one-ear-out-the-other thing. I think she'd be a good president, I guess. But nothing about her stirs my blood. And that to me, is way, way, way more dangerous to the national election.
Sanders? Love him or hate him, you CARE. You form an opinion. You know what he stands for and you have an opinion on his opinion. Yes, he's a socialist but that's only one piece of the puzzle. He trips a lot of people's triggers. He's for college. He's against banks. He's pro-middle class. He's for redistributing wealth. Love that or hate it, it is a wedge issue that gets people to listen, remember, and show the fuck up to the polls.
So, in that sense, I think he's got a better shot than Hillary at winning the national election.
Now...the next question: how do people pick a candidate.
Well, hard left and hard right voters are basically decided. We don't need to poll them, they vote on party lines.
So we're talking about moderate republicans, moderate democrats, and people who don't care much about politics in the first place.
Trump is going to have a hard time with the moderates. He's great at rallying up the base, he speaks their language. But he's kind of a buffoon. You can, with some amount of accuracy, split the republican party into to clans. One of them is focused on social issues (immigration, homosexuals, drug legalization, religion, abortion, etc). They're already die-hard red, they aren't going anywhere. The other are the economic republicans, or New York republicans as my SO likes to call them. They want less federal regulation over small businesses, lower taxes, strong national defense, less welfare. To my mind, both Trump and Sanders are kind of antagonistic to these interests in different ways. So its a toss up as to where they'll go because it will totally depend on marketing. We're just going to see how the ad war plays in this demographic. But I don't think its decisive either way. A lot of middle class people are incredibly pissed about the fact that their kids can't afford college, but they don't want single-payer health care. A lot of middle class people are pissed about higher taxes for the wealthy, but they don't trust a TV personality to run the nation and they think Trump's a schmuck. It could go either way.
Moderate Democrats and "I only get my news from facebook" politicos, however, are going to have a much easier time stomaching Sanders to my mind. Sanders has one or two off-putting things (Socialism, being old and weird) but Trump pisses off a fuck ton of people. He's going to completely alienate the Latino vote (except those who vote on abortion issues). He's already really pissed off the woman's vote. He made a lot of sacrifices to rally the hard-red base so, in doing that, he's really pushing away moderates that will decide.
So for me, it comes down to this: between Sanders and Clinton, who is going to get college kids to knock on doors? Who inspires people? Who makes someone's blood boil? All things being equal, we get more excited about the edges than the center. Clinton, on paper, is more attractive but she's bad on TV and all anyone can say about her is that her is that she's better than the other guy. I'd rather be a socialist that boring. And Clinton, for all her good politics, is C-Span dull.
There's no greater sin in politics than being bad on TV.