The word dichotomy means: "division into two mutually exclusive, opposed, or contradictory groups." In Romans 8:5-8, Paul sets up an absolute dichotomy between things of the flesh [sinful nature] and things of the Spirit. He starts off by dividing all people into two groups: those who live according to the flesh and those who live according to the Spirit. Then he points out the defining characteristic of each group: what they set their mind on. Very simply, fleshly people set their minds on the flesh; Spirit-led people are instead consumed by the things of the Spirit. What's interesting here is that there is no middle ground. There are no loopholes in this passage. Either something is of the flesh or of the Spirit.
I have two thoughts on this passage. Firstly, it's possible for Christians to be walking in both ways in the space of a short time. I've seen this in my life. One second, I can be praying for my brothers and thinking about Christ's amazing grace; the next second, I'm indulging the flesh. Why is this? I think it has to do with the remaining indwelling sin that hides out in believers' hearts. We will see in verse 13 that there is still work to do in fighting the flesh.
Secondly, the things of the Spirit are laid out in the Word. I think meditation on Scripture would most definitely be a thing of the Spirit. So would prayer, fasting, loving others, forgiving those who sin against us--not to mention every fruit of the Spirit. I think most likely this refers to the things which God has commanded us to do.
I'm going to be applying this passage by watching what I set my mind on very closely. What I watch on TV, the music I listen to, the books I read, the thoughts I let my mind settle on--these can be discerned as either fleshly or of the Spirit. If "to set the mind on the flesh is death" it is very important for me to pay attention to where my mind is set, and, when I catch myself slipping, run to the Spirit.