In the 1950s, the Republican party was largely full of elite (some would say elitist), moderate businessmen typified by the Rockefellers. In the 1960s, a growing movement of discontented populists, who in the 1910s and 1920s were part of the Southern Democratic caucus but were pushed out by the Democratic Party starting from FDR and ending with LBJ's championing of civil rights.
The populists were not swayed by the moderate, elitist conservatives like Nelson Rockefeller, so they coalesced behind Barry Goldwater in 1964, taking the nomination and losing the election. Populism had beat the moderate conservatism, but it wasn't able to sell itself to the general election.
From 1964 onwards, the history of the Republican Party has in part been a fight between the moderate elite conservatives and the populist conservatives.
Ronald Reagan, in 1980, represented a truce: he created a platform that managed to appeal both to the populists and to the elite conservatives; free business principles, socially conservative principles. Largely a response to the Soviet Union and to American left-wing liberalism, they managed to build a coalition, and dominate their opponents. But George H. W. Bush was too far on the elite side, and Clinton ate away from the populism.
As the opposition changed its face, the truce kind of fell apart, and was especially destroyed under the George W. Bush era.
2008 Primaries. The elite had Mitt Romney, populists had Mike Huckabee, and somewhere in the spongy middle was McCain. McCain was a chance to try and rebuild the truce; his running mate, Sarah Palin, was supposed to bridge him with the populist wing, which he had more trouble with.
It was a failure of a campaign, and both sides fell into recriminations. Had Palin been an embarassment? Had McCain failed to live up to "true conservatism?"
That's the fight that's playing out right now. It's a battle for the soul of the Republican Party. Which caucus is going to win: the ailing, but often more electable elite wing (which at this point really isn't moderate at all), or the passionate, grassroots-fed populist wing?
The 2010 Midterms are not going to be a referendum on Obama, they're going to be a referendum on the soul of the Republican Party. If a series of Tea Party candidates, fresh out of their primary upsets, get some seats and establish themselves a serious movement (not just a right-wing spoiler fringe, like Nader was accused of being for the left), then the days are numbered for the remaining elites in the Republican party. Sarah Palin will become the party. You'll see a lot of people who previously were resisting the Tea Party movement getting sidelined; the Republican Elite will stop fighting the Tea Party movement. And the party might select Palin as their candidate for 2012.
On the other hand, if the Tea Party fails to materialize gains in 2010, the wind is going to be behind the sails of their opponents. The lobbyist-elite wing will start vetting new "GOP's great hope" characters, and trying to build momentum behind them. (This month's "honest intelligent conservative" narrative is around Mitch Daniels, Governor of Indiana, who state point blank "at some point we're going to have to raise taxes" and has the backing of The Economist, an elite conservative but excellent publication).
I don't know the future. But I think this fight between the elites and the "great unwashed" populism is going to be a historical turning point for the Republican party, and for the country as a whole.