If you decided to drive into Mexico, I would recommend buying the car rental car insurance (if you are going to rent the car here in the States). Also, in the last link I provided, it has a link in there if you desire to buy temporary insurance through their agency.

According to the last link posted in my references, it states that by June of 2009 you will need a passport to walk or drive into Mexico and re-enter the U.S. Contact Senator Leahy to get more detailed information in regards to the extension of the deadline for passports. Also, in any search engine, type in the Leahy-Stevens Amendment and it will give you the above info in more detail.

The following information came directly from a government website. I would call your local representative to find out the correct answer.

Right now you can walk or drive into these two towns with just your drivers license to get back into the county. The following info is just in case you are going to either travel after the begining of the year or are going to try to go now and not return until after the end of this year (Jan. 1, 2008).

If you decide upon traveling to Mexico and come back before the start of next year, all you need is your driver's license (unless you go by flying, I do believe you will need a passport).

Once the New Year kicks in, the following information is what you will need.You will be able to use a Trusted Traveler Card or a passport to re-enter the U.S. (if you plan on staying into the summer months of 2008).

If you come back before the summer of 2008, here is what you will need:

JANUARY 31, 2008
U.S. and Canadian citizens will need to present either a WHTI-compliant document (Western Hemisphere Travel Initiative), or a government-issued photo ID, such as a driver’s license, plus proof of citizenship, such as a birth certificate. DHS also proposes to begin alternative procedures for U.S. and Canadian children at that time.

If you come back during the summer of 2008 (at a time to be determined by the DHS), you will need the following (and passports won't be the only method by which you can re-enter the U.S.)

SUMMER 2008
At a later date, to be determined, the departments will implement the full requirements of the land and sea phase of WHTI. The proposed rules require most U.S. citizens entering the United States at sea or land ports of entry to have either a U.S. passport; a U.S. passport card; a trusted traveler card such as NEXUS, FAST, or SENTRI; a valid Merchant Mariner Document (MMD) when traveling in conjunction with official maritime business; or a valid U.S. Military identification card when traveling on official orders.

The implementation date will be determined based on a number of factors, including the progress of actions undertaken by the Department of Homeland Security to implement the WHTI requirements and the availability of WHTI compliant documents on both sides of the border. DHS and DOS expect the date of full WHTI implementation to be in the summer of 2008. The precise implementation date will be formally announced with at least 60 days notice.