He'll say, "I'm the Commander-In-Chief," in response to questions about nothing related to the military. He's introduced as the "Commander-In-Chief" in situations where it's not at all appropriate (fundraisers, etc.) For Bush, CIC is not a specific authority restricted to military battles, it's an essential part of Bush's general authority. He's not the Commander-In-Chief in Iraq, he's the CIC
everywhere. That's the conceptual framework.
What is Bush's authority as CIC? The Constitution might say it's simply to command the nation's Armed Forces, but the DOJ says something different. The DOJ states his CIC authority is "to protect the Nation from attack." The Constitution describes a specific role; the DOJ describes an abstract mission. And the CIC may use whatever means necessary to fulfill that mission. Indeed, any law that prevents the CIC from fulfilling those duties is itself unconstitutional. If FISA interferes w/the President's Consitutional authority to fight the war against terror, FISA itself is unconstitutional.
So, as "Commander-in-chief" Bush has the power to determine how we fight our wars. This "war on terror" is a global war, extending to fighting terrorism within the US. In order to find terrorists in Iraq, soldiers can conduct random physical searches of people's homes. In the same way, Bush can order the police or military can conduct physical searches within the US to find terrorists. That's the (absolutely crazy) argument, as far as I can tell.
Here's the link to the DOJ brief (sorry, it's a PDF file):
http://www.epic.org/privacy/terrorism/fisa/doj11906wp.pdf