Shelley is a Democrat, but his office has been opposing numerous efforts to delay the election, reports CBS News Correspondent Steve Futterman.
Meanwhile, the major candidates are acting as if the election is still on. The campaigns are continuing full speed ahead, with most of them planning to be on the road seeking votes.
"We are going to continue campaigning," said Arnold Schwarzenegger, who has a town hall meeting planned, while Gov. Gray Davis is set to make an appearances with Florida Senator Bob Graham and the Rev. Jesse Jackson.
"I thought I was running a sprint, and it looks like I may have to run a marathon," said Steve Smith, an adviser to Davis, the target of the recall. "And I don't even like running that much."
A three-judge panel ruled Monday that California's planned use of punch-card ballots — the same kind used in the contested 2000 presidential election — would disenfranchise thousands of Californians.
The court did not set a new date for the recall, but backed a suggestion from the American Civil Liberties Union that balloting be held during the March 2 presidential primary.
One of the groups behind the effort to yank Davis from office planned to appeal to the U.S. Supreme Court to keep the recall date Oct. 7. The circuit court's decision was stayed for a week to allow for such appeals.
"The appeals court focused extensively upon the Supreme Court's ruling in Bush v. Gore, the ruling that decided the 2000 presidential election, which means that if the justices decide to take the case they are either going to have to shore up their Florida recount ruling or back away from it," said CBSNews.com Legal Analyst Andrew Cohen.
In that case, the Supreme Court stopped Florida's recount on the grounds that all votes were not being treated equally.
"There is no way to predict what will happen now on appeal or even whether the Supreme Court, for example, will take the case," said Cohen. "You could argue that the justices will want to take this opportunity to expand upon their controversial Florida recount ruling. Or you just as easily argue that the Court will want to stay as far as way from this political fight as possible."
Conservative Republican State Senator Tom McClintock, one those hoping to replace Davis, called the ruling outrageous.
"This is an affront to the people's right to determine their elected officials for themselves," he said. "It's un-American. It's French."
"The 9th Circuit Court of Appeals attempts a judicial hijacking of the electoral process," said Rep. Darrell Issa, R-Calif.
"This recall has been like a roller coaster. There are more surprises than you can possibly imagine," Davis said. "I'll continue to make my case to the people that a recall is not good for them."
Independent candidate Arianna Huffington praised the decision, calling voter disenfranchisement "the dirty little secret of American politics."
Sean Walsh, a spokesman for Schwarzenegger, said the decision threatened to rob voters who had signed recall petitions. "With this ruling, you risk disenfranchising voters. Does this serve the interests of democracy or the general public?"
The appeals court unanimously ruled it is unacceptable that six California counties would be using outdated punch-card ballots. Those counties are already under court order to replace punch cards with more modern systems such as touch-screen ballots by the March primary.
The six counties include the state's most populous, Los Angeles, as well as Sacramento and San Diego counties. Altogether they contained 44 percent of California's registered voters during the 2000 election.
Monday's ruling comes from a court which, among other things, once declared the Pledge Of Allegiance unconstitutional, reports CBS News Correspondent Jerry Bowen. It has had its decisions overturned more times than any other federal court in the nation, prompting McClintock to call it the "laughingstock" of the federal judiciary.
Davis would probably benefit the most from the ruling if the election were held in March, because the presidential primary is expected to bring a large number of Democrats to the polls. It could also give Davis more time to address the state's budget crisis.
Observers say a potential postponement could have the sharpest impact on McClintock, who has shown momentum in the polls in recent weeks. McClintock has raised much less money than the other major candidates and would likely lose the high level of media coverage that has largely buoyed his candidacy.
"The political impact of the ruling is the law of unintended consequences," said Republican analyst Allan Hoffenblum. "It could mandate opening up the filing process again, so we'll have more candidates. People who dropped out could drop back in. Tom McClintock would be seriously impacted."
The California official responsible for elections, Secretary of State Kevin Shelley, told county election officials to prepare for the Oct. 7 election and said he would announce Tuesday whether he would ask the entire appeals court to review the ruling or appeal directly to the Supreme Court.
Voters reacted with mixed feelings about the decision.
"I don't like things when they are rushed. It's ridiculous, the wide field of candidates, the short election," said Vana Meydag, 50, of Whittier. "Maybe postponing is a good thing to give people time to reflect on what's going on."
Scott Fox, 47, of San Diego, was insulted. "I think the 9th Circuit Court of Appeals has just told us that the last 25 years of elections are inadequate to support the election of any candidates," he said.