If Nixon doesn't run, another moderate, such as Charles H. Percy, will probably win the nomination with support from Rockefeller and the liberal wing. Reagan's best chance of nomination is if Nixon can't contain the false rumour that circulated during the Republican National Convention that he was going to nominate the liberal Governor of Massachusetts, John Volpe, as Vice President. At that point, Strom Thurmond would be unable to keep the South in line for Nixon, and the majority of the Nixon delegates will likely fall in with Reagan. This may not have been enough to win on the second ballot, but it would certainly give Reagan a much greater opportunity to win the nomination.
If Reagan does win the nomination, George Wallace may not decide to run for the same reason he didn't run in 1964: the Republican candidate was sufficiently conservative that it would entirely split the conservative and segregationist vote to run. Regardless on if George Wallace runs, I highly doubt that Reagan would be able to win. He was supportive of a continuation of the Vietnam War, if not full escalation, and openly associated with Barry Goldwater, two very unpopular opinions in 1968 (especially the latter). Contrary to what one might think by looking at the final election results in 1980, it was a very close election for most of the campaign season. Carter's final nail in the coffin was having a televised debate with Reagan, where Reagan was able to portray himself as not nearly as radical as the Carter campaign portrayed him as ("There you go again." "Are you better off than you were four years ago?"). Without the luxury of a televised debate, without the economic malaise and inflation of the 1970s to challenge the New Deal/War on Poverty status quo with, and with his unspoken but none-too-subtle support for segregationists, there's no way Reagan would be able to garner the support necessary in the Midwest to win the election.
If, by some miracle, does Reagan win (and if a direct invasion of North Vietnam doesn't lead to nuclear war), then I highly doubt that Reagan would send the mixed message of recognizing the People's Republic of China while fighting their 'volunteers' in open warfare just south of their border.