In your position, I'd give serious thought to going on the market... chairing a healthy department pre-tenure is a bad idea, let alone an unhealthy one. It might have been better for your department to be placed in receivership, with a chair from outside and the understanding that you would take over after tenure.
Given that you are where you are, will you be chair when you come up for tenure? How will that affect the process? How is your relationship with your dean? This relationship, I think, will be crucial. I would be inclined to try to shift as much responsibility for difficult/unpopular decisions as possible onto your dean, and present yourself as the poor schlep stuck with implementing policies that have been dictated from above and that you don't always agree with yourself. In general I think that this is the wrong way to chair, but in your position, you're entitled to practice self-protection.
Thank you all so far for the advice. The situation is indeed a strange one-- I am quite aware of that!-- and is not ideal. I was asked to do this because there was no one else and, I think, because the admin thinks I can clean up the department. So far, the admin has given me full support and I did make it clear up front that there would be items I would need their help with. (There are some intricacies that I cannot discuss here, unfortunately, for fear of outing myself.) They are aware, at least to some extent, that they have placed me in an awkward situation, and one that I can not fully fix on my own. I have voiced my concerns.
Philo, your advice was really helpful. I will be chair when I come up for tenure, and am not serving as interim. I do think I have a good relationship with my dean and (for my part) I have been honest and forthright. The dean is hard for me to read, but has been helpful to me, though can, at times, be a little moody. I have been practicing self-protection, and also implementing policies that other veteran chairs on campus have. I often make comments that show I am not making decisions arbitrarily, but that I have talked to other chairs and the dean to see how they have handled certain items. I want to make it clear I am not making things up as I go, but make decisions based on thought and advice.
Prytania, thank you for your comments on killing faculty with kindness. I also try to do this, and find it mostly successful, although there are times when I see no other choice but to muscle through things to make sure certain items are completed and completed correctly. It is a weird balance, truly.
