Jane Galt has a fine (and typically fun) analysis of why the Democrats are suffering electorally -- and why things might get worse for them. Here's the important bit:
The Democrats, on the other hand, are a veritable festival of interest groups: unions, teachers, minorities, feminists, gay groups, environmentalists, etc. Each of these groups has a litmus test without which they will not ratify a candidate: unfettered support for abortion, against vouchers, against ANWAR drilling, whatever. A lot of groups means a lot of litmus tests, because with the possible exception of the teachers, no one group is powerful enough to swing an election by themselves.
This causes two problems. First, it drags the party platform marginally farther to the left than the Republican platform is to the right, which in a 50/50 nation is bad news, and it narrows the well of political talent. At the local level this doesn't matter, since districts go reliably for one party or another, but nationally it's a problem, which is why the Democrats are struggling to hold onto the senate and the presidency. It took a politician of the skill and charm of Bill Clinton to make it work.
Left unsaid is that by 1992, Democrats would have nominated "a small bag of live ferrets," if they thought it could end the 12-year Republican hold on the White House.
That's not to say that Bush has the 2004 election in the, uh, bag. But Democrats should pay close attention to what Megan/Jane has to say.
And so should you.