In 1995, after the Republicans had taken control of both the House and Senate for the first time in 40 years, there was so much attention on the architect of the Republican's victory, and the new Speaker of the House, Newt Gingrich that President Clinton was reduced to pleading that "The President is still relevant." As it turned out, he was right. The eager freshman Republicans were slow to learn that passing bills in the House didn't equal making law (see Fenno's Learning to Govern, and during the epic budget battle that shut down the government, Clinton outmaneuvered Gingrich and his supporters.
Now Bush is, I think, trying to prove he is still relevant, as his approval ratings fall, the end of his term nears, and the public (or at least media) focus on the race to replace him. And he's right--the president is still relevant, and always will be.
Bush vetoed a defense spending bill that gives him almost everything he wants, because he objects to a provision that would allow Americans to sue the Iraqi government for crimes committed under Saddam Hussein. The Democrats are miffed that Bush didn't give them a veto threat ahead of time so they could have negotiated on that measure.
But, although this is just speculation, I don't think that would have served Bush's interests as much as a veto. It's become clear to everyone that the Democratic majority is powerless to get anything done that Bush objects to. Smart observers noted shortly after last year's elections that they wouldn't have enough numbers to override a veto, but what was unclear was whether they had the cojones to push Bush to the wall on these issues by refusing to give him anything he did want and repeatedly re-approving bills nearly identical to those he vetoed to see if he had the guts to stand up to them, or whether the Republicans would consistently support him, given the voters apparent dissatisfaction with the war and with Bush.
It became clear last summer when Bush cast his first veto--on stem cell funding--and it not only stood, but the Democrats dropped the issue. The Democrats have also failed to force Bush to accept any restrictions or timelines on Iraq spending, and have at each opportunity chosen not to go toe-to-toe with Bush.
I think Bush is now kicking the Democrats in the face, letting them know just how much control he has. The Democrats have repeatedly chickened out--reaffirming the wimpy image many Americans have of them (even many who consistently vote Democratic). If they really believed their talk they'd stage a battle royale on one chosen issue where they believed the public would support them enough to make Bush back down.
They're supposed to be the loyal opposition, but they're so afraid of being called disloyal that they won't even be an opposition.